SKY NETWORK TELEVISION LIMITED
2020 Annual Report
Contents
Chairman’s Update
CEO Update and Q+A
At a Glance
Summary of Strategic Priorities
Our Customers
Our Content
Our Products
Our People
Our Community
Our Board of Directors
Financials
Other Information
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This Annual Report is dated 10 September 2020 and is signed for and on behalf of the Board of Directors by:
Philip Bowman
Director and Chairman
Martin Stewart
Director and Chief Executive
1
Sky / 2020 Annual Report Chairman’s Update
Welcome to our Annual Report for the
2020 financial year. To our long-standing
shareholders, thank you for your continued
support in 2020, and in particular to those
who participated in the capital raise.
We also recognise and thank those who
have chosen to become new investors in
Sky during this year.
2
The Annual Report provides an opportunity to look across
the past 12 months, stepping back from the inevitable focus
since March 2020 on mitigating the local and global impacts
of COVID-19 on all aspects of the Sky business. Despite what
are arguably the most uncertain times for many decades, Sky
continued to make good progress in executing on its strategy,
and delivering against the milestones endorsed by the Board.
Highlights include:
Satellite
We have continued our
improvement of satellite customer
retention and achieved net
growth in satellite customers
in the final month of FY20.
We renewed our contract with
satellite provider Optus which will
deliver a better technical solution
with lower pricing and greater
contractual flexibility to ensure
we can optimise capacity and
cost into the future. This renewed
arrangement positions Sky to
continue to serve our core base
of satellite customers with the
reliable delivery mechanism that
for many Kiwis remains the chosen
way to receive our great content.
Streaming
We have delivered significant
growth in the number of streaming
customers. Our purchase of
Lightbox and the subsequent
merging of this service with
our Neon streaming product
has progressed ahead of our
expectations, and we are now
positioned as the most popular
locally-owned subscription
video on demand (SVOD)
service in New Zealand.
Broadband
We announced Sky’s intention to
enter the broadband market to
broaden customer relationships
and add significant additional
value to them. We look forward
to revealing full details of a
broadband proposition that
will be differentiated on
quality, service and price.
Sky is a business in transformation,
positioning itself for future growth.
Whilst few of us could have predicted
the disruption that was to follow with
COVID-19, the Sky team responded
professionally during the initial
lockdown period and subsequent
restrictions. As an essential
service we continued to support
our customers throughout, always
with a strong focus on the safety
and wellbeing of staff, customers
and other stakeholders. Working
during Level 4 lock-down provided
an enforced catalyst to challenge
many of our processes and we have
been able to embed many of the
lessons as permanent improvements
in the way that we will operate going
forward. On behalf of the Board, I
thank Martin, the leadership team
and all Sky staff for their work and
commitment in a challenging year.
I noted in my letter in the Interim
Report in February that delivering
on Sky’s strategy would require a
strengthened capital structure. Faced
with the additional challenge of the
COVID-19 pandemic, the Board moved
decisively with a capital raise. With net
cash on the balance sheet Sky is now in
a much stronger position to navigate
any further headwinds from the virus
whilst continuing to implement the
refreshed growth strategy. As we
foreshadowed at the time of the
capital raise, further review of the
assumptions underlying the carrying
value of goodwill has been undertaken.
The Board is required to assess the
fair value of intangible assets at
each reporting date. The decision to
make a further non-cash write down
of goodwill reflects the combination
of heightened uncertainties over key
business drivers arising from COVID-19
and the current share price, supported
by an independent valuation.
Successfully delivering a compelling
broadband proposition for Sky
customers is a key priority, as is
delivering our ongoing technology
innovation programme, where we
seek to enhance the experience
of customers at every stage of
their interaction with Sky.
For three decades Sky has played
a vital role in the sport ecosystem
of New Zealand supporting an
increasing number of the codes,
whilst bringing content with great
production values to Kiwis across
the country. New Zealand is not a
large market by world standards
and bearing in mind that there are
limits to the amount that customers
are prepared to pay for content,
particularly in uncertain economic
times, we recognise the careful
balance required between meeting
the expansion appetite of sport codes,
sustaining our sport partnerships
and prudently managing costs
to ensure shareholder returns.
As part of the process of refreshing
the composition of the Board, it
was good to welcome Joan Withers
and Keith Smith to the Sky Board
in September 2019 and April of
this year respectively. Both have
already made a positive impact
and I look forward to their ongoing
contribution. Susan Paterson has
announced her intention to retire
from the Sky Board in October; her
contribution will be missed, and I
would like to recognise and thank
Susan for her service and contribution
to Sky over the last five years.
Thank you again for your investment
in and support for Sky. I look forward
to speaking with you at the Annual
General Meeting in October.
Philip Bowman
INDEPENDENT CHAIRMAN
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Sky / 2020 Annual Report CEO Update and Q+A
We are living in extraordinary times.
As we reflect on the past year for
Sky it is inevitable that we are
drawn to the last few months of
COVID-19 and what it has meant
for our business, our people, our
partners and our investors.
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I am immensely
proud of the way
the Sky team
responded to the
COVID-19 challenge,
staying focused on
meeting the needs
of our customers
and continuing
to deliver on our
strategy. Here
are some of my
personal highlights
from the last few
months:
•
The superb engagement from customers during
the lockdown period, with strong viewership and
positive feedback, including a pleasing improvement
in NPS. It was a reminder of the special role that
Sky plays in the lives of our customers, entertaining,
informing and inspiring with our great content.
•
The ‘can do’ approach of our people, who pivoted to
working from home in less than 48 hours, embraced
the Zoom culture, and took a mature approach to
the restructuring that we had to undertake.
•
The engagement with our sport partners, who worked
constructively with us to deliver interesting content
when live sport was temporarily on hold. We successfully
negotiated rights fees for the lost season, recognising
these are difficult times for everyone and trying to
reach solutions that were fair for all. We are now
working closely with all of our sport partners to continue
to deliver great content in the coming months.
•
We appreciated the swift support of our entertainment
studio partners to help secure additional value
for our affected sport package customers.
•
Hearing that our ‘Streaking Baby’ (Life Needs
More Sport) ad was chosen as New Zealand’s
favourite ad. It’s great to make people smile.
•
The successful launch of new Neon, which merged the
best of Lightbox and Neon into one superb streaming
service that has quickly become the most popular
locally-owned Subscription Video-On-Demand (SVOD)
service – nicely timed for our customers to have great
content to binge on while ‘staying in’ is the new reality.
•
The feedback from our commercial customers when we
let them know that we were discounting and often fully
pausing their payments while COVID-19 restrictions were in
place. Our customers in the hospitality and accommodation
industry have been particularly hard hit and we have
done our best to support them through this time.
•
I look forward to speaking with you at the
Annual General Meeting in October.
Q+A on next page
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Sky / 2020 Annual Report A key part of being
able to continue to
deliver and perform
was ensuring we
were in a strong
financial position, and
we are grateful for
the support of our
investors in raising
equity. It means we
have entered the 2021
financial year with a
strong cash position
and the ability to
implement key aspects
of our strategy.
What are the main aspects of Sky’s strategy?
Let’s start with our goal, which is to connect our customers
with the sport and entertainment content they love, in ways
that work for them. We do that by securing the rights that
matter, delivering it across all platforms and devices, using
customer insights to drive our decisions, and innovating in the
digital space to meet current and future customer needs.
As a modern multi-media company that means delivering across the
four pillars of Satellite, Streaming, Broadband and RugbyPass.
Why is broadband so important?
There’s the obvious adjacency as a mechanism for high quality delivery of
our streaming and Video-On-Demand services. But it’s much more than
that. Offering a great broadband experience, differentiated on service,
price and quality, means we can deepen our customer relationships and
offer them much more value from their Sky bundle. We’re getting great
feedback from customers about what they want to see from us, with a
significant number of our satellite customers indicating they would buy
broadband from Sky based on our customer service reputation alone.
When is Sky Broadband coming?
Sky Broadband is already a reality, with successful in-home trials
underway with Sky staff. The next phase of testing involves
offering Sky Broadband to a group of customers to enjoy and
provide feedback on, and we remain focused on a FY21 launch.
What changes have you made internally?
Our transformation initiatives are designed to build a leaner, more
responsive and collaborative business. Clearly there is a cost-out
focus, with an 18% reduction in staff and ongoing emphasis on cost
control. But the main goal is to become a modern, digital, consumer-
led multi-media business, and we are well positioned to deliver it.
One of the positive things that emerged from the COVID-19 restrictions
was how well our people were able to work remotely. As a result
we are implementing a new hybrid flexible working model, with a
‘work anywhere’ ethos. Many of our people are keen to embrace it,
and it also means we can look to reduce our property footprint.
You talk about being customer-focused, but
how do you really know what customers want?
In the last year we have made significant progress with data and
insights, including creating a great initiative called Sky Nation
with over 20,000 highly engaged customers giving us regular
feedback on their Sky experience and what they want from us.
Our new ‘big data’ partnerships with specialists like Dot Loves
Data enable us to marry Sky viewing data with external data
sources to provide deeper insights, and our new sport viewing and
analytics platform enables deeper analysis of what sport fans
are watching and how they are watching. We continue to expand
our insights capability, and it’s a valuable resource for Sky and
our partners to become even more customer focused.
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What’s happening with sport in 2020 and 2021?
We’re having positive discussions with all of our sport partners,
and there’s a real commitment to delivering compelling sport
competitions for fans. It’s almost certainly going to be different
from what customers are used to, and some of the COVID-19
restrictions mean we’ll have to keep flexible, but it also means
there’s a great opportunity to try new things and innovate.
What’s happening with RugbyPass?
We bought RugbyPass in August 2019 to expand our reach into
the global rugby market and to open up new avenues for future
growth. While the current uncertainty surrounding the availability of
international rugby has slowed progress in the streaming business,
it’s been great to work in partnership with NZ Rugby and SANZAAR
to bring Super Rugby Aotearoa to audiences outside of New Zealand
through RugbyPass. Continuing strong demand across all RugbyPass
content platforms, with over three million unique views in April, up 54%
on the prior year, indicates ongoing audience appetite. Our immediate
focus has been to quickly pivot to a lower cost model to capture
opportunities, and we continue to see potential for future growth.
How are you feeling about entertainment
content and the threat of big studios
going direct to consumer?
One of the positive things that came out of the COVID-19 lockdown
was the reinforcement of the ‘power of the bundle’. Our customers
embraced all aspects of our entertainment content, and even with
the temporary paucity of live sport only 8% of our satellite sport
customers changed their subscriptions. We were able to keep our
loyal customers entertained and engaged because of the deep
range of great content we have available. So yes, we absolutely
acknowledge that trends are shifting, including towards direct-
to-consumer in some markets, but we believe our global partners
continue to see the value of using Sky to reach their New Zealand
fans and the value of our bundle and strong customer relationships.
We also offer the unique ability to deliver their content across
satellite, streaming and free-to-air, and the ability to bundle their
apps with our existing offers and upcoming broadband service.
We feel ready for FY21. On behalf of the team here at Sky,
I would like to thank you for your ongoing support.
Martin Stewart
CHIEF EXECUTIVE
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Sky / 2020 Annual Report At a Glance
Sky is New Zealand’s
leading digital
multi-media
business committed
to connecting our
customers with
the sport and
entertainment
content they
love, in ways that
work for them.
Through our partnerships
with leading studios and
sport rights holders, expert
curation and award-winning
content production, we
provide New Zealanders with
the best range of acquired
and created content,
including sport, movies,
shows, documentaries,
music and news.
We offer New Zealanders
the choice to watch what
they want, when they want,
how they want, by delivering
our content across a range
of subscription satellite and
streaming products. Our
free-to-air channel Prime
opens a window into Sky
for all New Zealanders, and
our international RugbyPass
business delivers rugby to
a more global audience.
This year we’re celebrating
our 30th birthday. As a proud
New Zealand company, we’re
committed to supporting our
sport and creative sectors,
and our local communities.
FY20 Highlights
$747.6m
Revenue
$82.7m
Free cash flow
$13.95
Launched new Neon at
attractive price point
153%
Growth in streaming
customers
An incredible range of content in New Zealand
70+
Satellite channels
40
Sky Go channels
streaming online 24/7
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Dedicated sport
channels and streams
1000s
of TV shows and movies
On Demand
50+ different sports and events,
from grassroots to the elite
All Blacks
NRL
Netball
V8 Supercars
Sky Sport Breakers
PGA
Delivering great content in all the ways our customers want
8
1
990k
Customers
+9pts
NPS improvement through
customer first approach
$23.5m
Tax contribution in New Zealand
1.2m
Customer calls supported by
our New Zealand based team
992
Sky Crew
30
Celebrating
30 years
An incredible range of content in New Zealand
A world of acquired content
Telling local stories
in partnership
with NZ On Air
International
News
Dedicated children’s
channels and
services, supporting
safe viewing
Strong entertainment
partnerships
The Handmaid’s Tale
Once Upon a Time
in Hollywood
Sis
Outlander
Westworld
Go Further South
Aussie Gold Hunters
Love Island
Honey Wars
coming soon
1) Includes third party bundled wholesale subscribers from the Lightbox acquisition. These subscribers
account for approximately 52% of total entertainment streaming customers at 30 June 2020.
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© 2019 MGM Television Entertainment Inc. and Relentless Productions, LLC. THE HANDMAID’S TALE is a trademark of Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved.Sky / 2020 Annual Report How we’re enhancing our
position for the long term
For our customers, our investors, our people,
our partners and New Zealand
Our ambition
Sky’s goal is to connect
customers with the sport
and entertainment they
love, in ways that work
for them.
We aim to delight our customers
across all platforms and devices,
and we’re innovating in the
digital space to meet current
and future customer needs.
We focus on securing the rights
that matter, and use customer
insight to drive our decisions.
We are transforming into a
modern multimedia company,
with four strategic priorities.
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What matters
most
Our customers
Delighting our customers by
being a truly customer and
data-led business
Our content
Sport and entertainment
leader through trusted
partnerships, expert curation
and innovative storytelling
Our products
Connecting our customers to the
content they love, in ways that work
for them - now and in the future
Our people
Doing right by our people by focusing
on our capability and culture, ensuring
our ways of working meet the needs
of our customers and partners
Our community
Making a positive difference to
New Zealand’s sport and creative
sector and our local communities
Our strategic
priorities
Satellite
Strengthen our significant core
business through continued reliable
delivery and enhanced value perception
Streaming
Grow our entertainment and sport
streaming business. We are using digital
innovation to improve the customer
experience and move to a lower cost model
Broadband connectivity
Grow customer relationships with
broadband offers, differentiated on
quality, service and price
RugbyPass
Develop and grow an international rugby
content business and become the online
destination for fans globally
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Sky / 2020 Annual Report Our
Customers
Delighting our
customers by being
a truly customer and
data-led business
This year we’ve continued to build a culture that
genuinely listens and places customers at the heart
of our decisions. We’ve developed more capability
in the insights and customer experience areas of
our business. We’ve been talking to our customers
to understand what matters most, in order to
create meaningful experiences and exceed their
expectations now and in the future.
Harnessing data and
actionable insights
With a real time
understanding of our
customers
To shape business
decisions, delight our
customers and create
life-long fans
Sky Nation
Our Sky Nation community
Sky Nation is our customer community helping us
to uncover direct, agile and actionable insights
to make more data-driven decisions at Sky.
23,000
Sky customers
Launched in April 2020, we were thrilled to see our
Sky Nation community grow rapidly, with 23,000
customers from across New Zealand opting in to
engage with us to help make a positive impact on
the products and services that matter to them and
hear about the outcome of their feedback.
We use Sky Nation as a panel to get feedback on all
sorts of projects, initiatives and new ideas – we’ve
had 40,000 responses to a range of topics including
the appeal of Sky’s offering and channels, what
customers want from Sky Broadband, and what
fans want to see in future sport competitions.
The feedback we receive through Sky Nation will help
every part of Sky, from marketing and sales through to
content and technology, work collectively to craft market
leading propositions and deliver customers’ expectations.
In doing so we aim to deepen our customer relationships,
increase customer satisfaction, and consequently
loyalty; growing long term value for our investors.
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Customers from
Cape Reinga to Bluff
20%
in rural NZ
65%
Happy or
delighted
with Sky
55% 44%
Male
Female
1%
Gender
Diverse
What we’re hearing from
our customers
“ Sport coverage cannot be
bettered by any other company.”
“ I think apart from the free
channels, customers should be
able to choose the channels
they want.”
“ I like the large variety of shows ...
I got Neon primarily for Game of
Thrones, but have discovered a
wealth of up to date material.
I am so so impressed.”
“ Great service from Kiwi
based call centre, very helpful,
pleasant and onto it.”
“ I thought it was excellent that Sky
offered free movie channels during
the lockdown. Well done Sky - this
has been greatly appreciated.”
“ The Sky box being Wi-Fi
compatible is such a bonus,
now Sky On Demand is at a
click of a button.”
“ As a family, we love to watch
movies. During lockdown I had
upgraded to the movies package.
It was super easy to upgrade with
the help of a supportive team
member online. I also love how we
can purchase individual movies to
watch as a family cheaper than
going to the actual movies! Bonus!”
“ I like the ability to see it all in one
place - free TV, sport, movies etc.”
“ I would like to see Sky better
reward your long-standing
customers.”
“ It’s great being able to only buy a
pass for the time you want to use
it. Has a wide range of sport.”
“ Have been a member since
1995 and could not live without
Sky. Never had an issue, I get
variety and the ability to watch
through Sky Go.”
“ I love the restart feature on the
movies, ability to download to
my box, Box Sets for binge
watching sessions.”
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Sky / 2020 Annual Report Our
Content
Sport and entertainment
leader through trusted
partnerships, expert
curation and innovative
storytelling
A story is powerful. It has the ability to connect
humans to their wildest imagination, their history
and whakapapa, their feelings, igniting their
hopes and dreams. Whether they’re an aspiring or
armchair athlete, an adventurer, a newly inspired
isolation foodie or just a kid at heart, Sky brings
New Zealanders stories that connect with the heart,
and the content they love in ways that work for them.
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Sky / 2020 Annual Report The Best in Entertainment
The content and media
landscape continues to
change at pace. Consumers
have plenty of choice, there’s
no question about that – but
it’s also a pretty confusing
landscape.
We make it easy for our customers
by bringing a range of great content
together in one place, whether on the
big screen via satellite or on device
with Neon or Sky Go.
Our deep partnerships with world
renowned storytellers enable
us to share the best of global
entertainment, and we also showcase
strong local stories, often working
with NZ On Air. This year we renewed
multi-year partnerships with:
BBC Studios, home of BBC UKTV,
BBC Earth, BBC World News and
new preschool channel, CBeebies;
ViacomCBS, home of Comedy Central,
MTV, Nickelodeon, Nick Jr, MTV Hits,
MTV 80’s and Nick Music; Sky News
Australia and Vice. We also renewed
our partnership with Rialto, marking
20 years of the Rialto Channel and
a long-term commitment to New
Zealand’s independent and festival
movie and documentary channel. And
we developed new partnerships with
Hopster, who offer diverse storytelling
for kids; and CuriosityStream, for the
ultimate learner.
Buzzworthy and
bingeable shows
Premium content lovers were
spoiled for choice across Sky and
Neon with new seasons of the
most talked about shows like
Westworld, Peaky Blinders and
Outlander and the final seasons
of Homeland and Ray Donovan.
New obsessions Watchmen, Years
And Years and I May Destroy You
captivated audiences globally
and locally, tapping into timely
conversations around diversity,
politics and consent. British
content overperforms with Sky
audiences, from the miniseries Quiz
that delved into the Who Wants
To Be A Millionaire scandal of the
early 2000s to the sumptuous
Jane Austen adaptation Sanditon
from the BBC.
Coming in hot from
Hollywood
With mega-hits such as Jojo Rabbit,
Joker, Aquaman and Once Upon A
Time in Hollywood our blockbuster
movie slate is unrivalled, and with
quality animated and family titles
like Abominable, Spiderman: Far
From Home and The Secret Life Of
Pets 2 there is plenty to keep the
kids entertained.
The best of real-life
entertainment
Perennial hits from our exceptional
factual and lifestyle channels continue
to deliver large audiences and whether
our customers want edge-of-their seat
viewing or a lean-back experience, Sky
has them covered. It seems viewers
just can’t get enough of Gold Rush,
Love It or List It Australia or Shark
Week. From the Australian bushfires
to the global pandemic, Sky’s array
of news channels kept our customers
informed around the clock. HBO true
crime documentary series’ McMillion$
and I’ll Be Gone In The Dark proved
popular across all platforms, while
at the opposite end of the reality
scale Love Island UK had massive
engagement and drove acquisition for
Neon.
For our littlest customers
The addition of CBeebies to our
suite of family channels further
strengthened our offering and
bolstered video-on-demand in the
kids space across both Sky and Neon,
while the recent launch of Nick Music
provides a safe space for kids to enjoy
their favourite music videos, further
expanding the powerhouse brands of
Nick and Nick Jr.
Local content, Sky Originals
The keyword for local content
is diversity. Diverse teams
producing diverse and inclusive
local content, much of it funded
with the support of NZ On Air.
Comedy special Sis and upcoming
drama series Inked are scripted
projects which came from an initiative
supporting new voices. Sis is the first
Polynesian project to premiere on
Comedy Central New Zealand with
huge engagement from NZ, Australia
and around the world, and Inked will
be the first largely Chinese language
series to premiere on a major free to
air network.
The impact of COVID-19 forced
the creative community to go into
overdrive and Prime’s drama INSiDE
was created during lockdown.
Recent local factual shows include
Honey Wars, an observational series
shot in the Far North inside a Māori
owned mānuka honey business, and
the upcoming Growing Dope, following
the ups and downs of a medicinal
cannabis business on the East Coast in
the heart of Ngāti Porou.
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Polynesian comedy
Sis breaks new ground
Through Sky Originals, we’re committed to
supporting and producing an increasingly diverse
range of local content for Sky’s platforms to reflect
a broad range of New Zealand communities.
Made with the support of NZ On Air, Sis is a
spin-off of the award-winning web series Baby
Mama’s Club and yet again broke fresh ground
for content in New Zealand.
The comedy sketch special follows the ‘ride or die’
friendships of cousins Malia, Gee Gee and Miki.
They’re street, stylish, and hilariously relatable.
As they navigate through a series of stand-alone
misadventures, the Polynesian millennials learn
about life and sisterhood.
130+
2020 Emmy nominations
across Sky. We also
have New Zealand’s
largest range of 2020
Emmy nominated
content in the televised
primetime categories,
with 69 nominations
April 18
Neon’s biggest streaming
day of FY20
Game of Thrones
Most downloaded series
on Sky On Demand
Big Little Lies
Most watched series on Neon
Crazy Rich Asians
Most watched movie on Neon
Bohemian Rhapsody
Most watched movie
on Sky Go
Aussie Gold Hunters
Highest rating factual
content on Sky
Aquaman
Highest rating movie on Sky
Movies & most downloaded
movie on Sky On Demand
Vera
Highest rating entertainment
content on Sky
Love Island UK
Attracted new customers
and a different type of
content for Neon
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Sky / 2020 Annual Report Life Needs More Sport
30 years of sharing the best
and most diverse range of
sport with New Zealanders
has been at the heart of the
Sky promise. The breadth and
depth of our sport content is
nothing short of exceptional.
A glance at our rugby offer
demonstrates this best, with premium
rugby featuring the All Blacks, Super
Rugby, the Black Ferns, Māori All
Blacks, international competitions
such as the Gallagher Premiership,
Super Rugby Australia, TOP14 or the
Men and Women’s HSBC Sevens, right
through to domestic competitions
with Mitre 10 Cup, the Farah Palmer
Cup, First XV and club rugby from
among the 600 plus clubs throughout
Aotearoa.
The variety can be seen across a host
of other sports including rugby league,
netball, football, golf, motorsport,
athletics, cricket, cycling, winter sports,
tennis, yachting, surfing, basketball,
darts, snooker, badminton, and more.
In short, “Life Needs More Sport” and
Sky Sport is the one to provide an
inexhaustible supply.
Connecting
A significant change in the way
we tell our story as the home of
sport is through our award-winning
marketing campaigns. Everyday New
Zealanders and industry experts
have repeatedly voted our Life Needs
More Sport advertisements as their
favourites. Our Summer of Sport
campaign featuring a cheeky toddler
on a typical Kiwi beach perfectly
captured the joy and inspiration
sport delivers week in, week out.
We reach hundreds of thousands of
New Zealanders every day and week
through our social media platforms,
engaging them in conversations about
their favourite sports and athletes
and our in-house promotions team
creates and despatches eye-catching
advertisements for the vast array of
content we offer on Sky Sport.
The Home of Sport
2019 and 2020 has seen rights
secured across a wide variety of
sport and competitions from the
PGA Championship and Masters,
through to the Commonwealth
Games, Rugby, Netball, Supercars,
ICC Cricket tournaments, and
deals with Cricket Australia
(including Big Bash), BCCI and IPL.
Thrill-seekers can now catch up
with the wildest tricks and events
featured by Red Bull thanks to a
long-term partnership to share
their content across all Sky Sport
platforms. We’re delighted to
partner with World Surf League
to showcase the best from around
the globe in this fast-growing and
new Olympic sport. Our landmark
2019 deal with New Zealand Rugby
reflects the unique love Kiwis have
for the sport which unites and
inspires us week in, week out.
But it’s about more than accessing
broadcast rights. As the Home
of Sport, we are invested in the
growth of sport at all levels of
the game and all parts of our
community. This means supporting
and sponsoring grassroots and
community sport (Sky Sport
Next, Rugby League Roadshows),
as well as women’s sport (Kiwi
Ferns, Women’s Warriors, Tall
Ferns, White Sox, Netball NZ).
This approach strengthens our
relationships with key sport partners
and athletes through understanding
their challenges and supporting our
partners and athletes in tackling these.
We are committed to innovating the
sport experience at every touchpoint
– be that in broadcast, through
digital platforms, or in stadium at
Sky Stadium and Eden Park. As sport
and its fans change over time we’re
focused on reaching future fans
through associations with growth
sports like basketball and football
through strong relationships with the
Sky Sport NZ Breakers and Wellington
Phoenix. These sit alongside our
connections with established sports
in New Zealand – which we continue
to nurture such as netball, rugby and
rugby league.
Free to access
While delivering the best content
possible to our customers is our top
priority, we have also committed to
providing important content free
to access.
Examples are many and varied including
the finals of the Cricket World Cup and
Netball World Cup, key Super Rugby
Aotearoa games on Prime, the ANZ
Premiership Grand Final, and free
access to Silver Ferns, Constellation
Cup games, Vodafone Warriors, Black
Ferns and Kiwi Ferns matches.
18
Against a backdrop of a global pandemic and thanks to the co-
operation of the entire population, New Zealand Rugby pulled
off a spectacular tournament in Investec Super Rugby Aotearoa;
captivating rugby fans here and around the world.
322,260 people flooded through the gates with an average crowd of 17,903; up 55.35%
on the 2019 regular season and up 65.23% on 2020 pre-COVID. Sky Sport viewership
increased 65.2% (vs pre-COVID) across all our platforms with fans engaging on Sky
Sport, Sky Sport Now and Sky Go, and in pubs and clubs throughout New Zealand.
Initially the novelty of being able to play and attend live sport was likely a huge
contributor to the success of the competition, but it quickly became evident that the
finest players in the world were meeting each week in a battle to win big in some of the
most creative, exciting and explosive rugby we have seen in a while.
The Sky Sport crew tested a variety of new initiatives designed to heighten interest in
the games such as Player Cam, Fan Cam and in-game coach interviews. The stadia
also pulled out all the stops to provide fun-filled experiences for families and fans.
Sky congratulates everyone involved in Super Rugby Aotearoa. Bring it on in 2021.
All Blacks v Wallabies
17 August 2019
Top sport event on Sky
Sport and Sky Sport Now
22,634
Hours of live sport
The way sporting codes have
pulled together to get back up
in the face of COVID-19 just
goes to show how sport itself
builds resilience.
In addition to the success of rugby,
Sky Sport has been right behind
the ANZ Premiership, the Vodafone
Warriors who have taken on the
challenge of competing in the re-
started NRL away from family and
friends, and the Wellington Phoenix
who have also competed in the
A-League away from home.
Out of adversity comes opportunity
and Sky Sport has supported,
broadcast and live-streamed the
unique and unprecedented events such
as the Sal’s NBL Competition, the
New Zealand Tennis League and the
New Zealand Badminton League.
COVID-19 brought out the best in
the Sky Sport team with popular
new shows launched and produced
remotely during lockdown including
Isolation Nation, NetFit, Netball Zone
and Sky Sport Presents The Pod. The
latter show digs deep into some of
the personal histories of outstanding
leaders in their respective sporting
fields and has generated substantial
coverage in mainstream media.
19
Sky / 2020 Annual Report Our
Products
Connecting our
customers to the
content they love,
in ways that work
for them – now
and in the future
We know that we have a privileged role in
our customers’ lives – we entertain them,
we amuse them, we inform and inspire them.
We know our customers choose Sky for our
great content – and we’re obsessed about
delivering it in ways that best meet their needs.
The breadth and depth of our sport and
entertainment content and the way in which
our customers can access it means that Sky
can be in the lives of all New Zealanders.
20
Neon and Lightbox:
Better together
In February 2020 Sky purchased
the New Zealand streaming service
Lightbox. The recent merge of
Lightbox with our own streaming
service Neon has created a
powerhouse paid streaming service
for New Zealanders, bringing together
the finest features from both services
under a reinvigorated Neon brand.
The best hit TV shows, movies and blockbuster
movie rentals are now all in one place, and we’re
adding new content regularly. We’ve made the
platform easier to use, increased stability and
added new features. Customers can access
Neon on more devices than ever before, create
up to five profiles per account with profile-based
recommendations for a more personalised
experience, and enjoy a dedicated kids area with
parental controls for safer viewing.
With Download to Go, customers can download
their favourite shows or movies to mobile or
tablet devices to watch offline or while on the
move, and with movie rentals customers can
rent the latest digital release movies.
For $13.95 per month with no contract required,
the new Neon offers a world-class streaming
experience that delivers the best range of
quality content and value for money.
Since the migration to new Neon
2 hours
Average hours customers
spend on Neon per day
Gangs of London
Most watched TV series
Joker
Most watched movie
21
Sky / 2020 Annual Report Sky Sport Now:
Game-changing sport
streaming
Sky was the first company to bring sport
streaming to New Zealand, first with Sky
Go and then FanPass, which streamed
four sport channels 24/7 for four and a
half years. In August 2019 we changed
the game again when we transformed
FanPass into Sky Sport Now, adding eight
additional live channels including ESPN
plus a library of On Demand content.
Sky Sport Now provides customers with the choice
to watch all of Sky Sport’s great content on a range
of devices through a weekly, monthly or yearly pass.
No long-term contracts, instant access, and no Sky
Box needed. With its unrivalled line up of Live and On
Demand sport and huge range of feature content,
highlights and stats, Sky Sport Now is New Zealand’s
premiere sport streaming service.
Sky Sport Now simultaneously streams 12 high-
definition sport channels 24/7. That’s over 100,000
hours of sport streaming, and thousands of events
every year.
Over the past year we’ve continued to enhance Sky
Sport Now, making it available on more devices
and adding more features to meet customer needs.
Sport is best on the big screen and Sky Sport Now
customers can now watch sports content on smart
TVs from Panasonic, Sony, TCL, and Samsung, via
Freeview’s Android TV platform as well as Apple
TV and PlayStation 4. There’s so much sport on Sky
Sport Now that there are simply not enough hours
in the day to be able to watch it in real time, so
we’ve extended the catch-up features across more
platforms so fans don’t miss out on the action.
As New Zealand’s ultra-fast broadband access
and uptake increases, and more and more New
Zealanders choose to stream their sport content,
we’ll continue to optimise Sky Sport Now to ensure
we continue to deliver the best possible sport
streaming experience to New Zealanders.
22
The future
of satellite
While Sky is embracing
a streaming future, we
remain committed to the
hundreds of thousands
of New Zealanders
who currently rely on
our satellite services to
receive their sport and
entertainment.
We’ve recently announced a revised
contract with our satellite provider
Optus. The updated agreement
enables Optus to build and launch
a new breed of satellite that is fully
configurable in space, meaning its
location, coverage, bandwidth and
capacity can be changed in orbit as
customer demands evolve – where
traditional satellites are limited by
on-ground configurations that can’t
be altered after launch. The new
software-defined satellite, Optus
11, will give Sky the ability to flex the
transponder capacity as customer
demands evolve over the course of the
ten year arrangement.
The revised contract with Optus gives
our customers comfort that we’ll be
able to continue to deliver our great
content to them without disruption as
we have done successfully for many
years. The New Zealanders who don’t
have access to streaming-capable
internet can rest assured that we
have them covered.
Sky Broadband
In May we announced plans
to become a one-stop-shop
for connectivity and content
through the launch of a high-
performance broadband service.
We want to provide the best possible
sport and entertainment experience
to New Zealanders, and a high-quality,
high-speed broadband service built
specifically for entertainment helps
us do that. It also enables us to
reward our customers with greater
value whilst opening opportunities for
growth. The service will draw on our
wide reach, rich content offering, and
New Zealand based customer services
team. We’ve harnessed customer
insights to design Sky Broadband
around exactly what New Zealanders
want – super-fast reliable broadband,
genuine responsive service, simple
packages, great pricing and not a
word of jargon in sight.
We’ll first offer Sky Broadband to
our customers as an opportunity to
reward their loyalty. We’ll then focus
on the hundreds of thousands of New
Zealand homes that are fibre ready
through the Ultra-Fast Broadband
scheme but not yet connected.
Sky Nation insights
• Our own customers are
significantly more likely to
consider Sky Broadband due
to stronger brand perceptions
and the desire to bundle their
TV and broadband packages
• The majority of Sky customers
believe we are credible and
have a reputation for quality
service and reliable service into
Kiwi homes. Sky Broadband
can lean on our strengths of
reliable and quality service into
Kiwis homes
• Customers overwhelmingly
want us to focus on three
key areas; speed, value for
money and rewarding existing
customers for their loyalty
• Our base has strongly advised
they want a good value for
money bundles and prices for
broadband, and appear more
interested in long term value,
rather than one off deals or
upfront discounts
RugbyPass
RugbyPass is the premier destination
for rugby fans across the globe, with
news, analysis, shows, highlights,
podcasts, documentaries, and in some
territories live streaming of rugby
competitions all in HD.
RugbyPass’ subscription arm consisting
of sport streaming, on demand rugby
content and a linear TV channel
operates primarily in Asia, with smaller
outlets in Europe and Australia, whilst
the advertising-funded web content
and media arm has built the largest
independent rugby audience in the
major rugby markets.
Sky purchased RugbyPass in 2019 to
open up growth opportunities and in
particular, expand our reach into the
global rugby market. While COVID-19
has impacted our ambitions for the
sport streaming side of RugbyPass due
to the lack of global rugby product,
we’ve taken the opportunity to refocus
towards the audience media business.
3 million
54%
on the prior year
unique views in April
23
Sky / 2020 Annual Report Our
People
Doing right by our people by
focusing on our capability and
culture, ensuring our ways of
working meet the needs of
our customers and partners
Critical to our organisation is a talented
and diverse workforce who share
a common goal – delivering for our
customers.
Our people are crucial to our success as a
business. We work hard to ensure that we
continue to attract the best, develop skills
and make Sky a great place to work.
Our People have experienced a lot of
change this year, and we recognise that
organisational change and the impact of
COVID-19 bring with them challenges and
uncertainty.
As we transform Sky into a leaner, more responsive,
collaborative organisation, we have farewelled a
number of our team members. Many have been a
part of the Sky family for many years, and we thank
them for their dedication and contribution to Sky.
Our superb team showed resilience and a strong
customer service ethos through the COVID-19
lockdown. The rapid pivot to working from home
while continuing to deliver Sky services, at a time
when our customers needed them most, has paved
the way for a hybrid flexible working policy aptly
dubbed ‘Anywhere Works’. It also accelerated our
digital capability and will have positive impacts on our
property needs.
As New Zealand and the world continues to grapple
with the challenges of COVID-19, the safety and
wellbeing of our people will remain a core focus. We
have worked with Sir John Kirwan and his Mentemia
team to deliver mental wellbeing programmes for
our people, including making available the Mentemia
wellbeing app and workshops to equip our people
with the tools and techniques to improve mental
wellbeing.
24
25
Sky / 2020 Annual Report Our
Community
Making a positive
difference to
New Zealand’s
sport and
creative sector
and our local
communities
We’re proud to make a significant
social, cultural and economic
contribution to New Zealand.
This year Sky supported 992 jobs, invested millions
into our creative and sporting industries, and
continued our rich history of working alongside our
customers, crew and partners to make a positive
difference in our local communities.
Sky is a longstanding supporter of causes supporting
youth health and wellbeing. Special Children’s
Christmas Parties is a charity helping to bring some
joy to more than 10,000 special Kiwi kids at the
six events held across New Zealand. The parties
are filled with bouncy castles, games and gifts for
Kiwi kids in need, and Sky has been a part of these
special days for 14 years. The Starship Foundation
gives our children better health and brighter futures.
We’ve been a supporter since 2001 – ensuring Sky
channels are at every Starship bedside to entertain
(and sometimes just distract) patients and families
during their stay, and donating airtime to help the
Foundation raise awareness and donations for their
fundraising efforts.
Sport has a great part to play in fostering children’s
wellbeing, social skills and academic success. As the
Home of Sport, we’re committed to improving access
and engagement to sport for all New Zealanders.
In addition to supporting grassroots sport, over the
past year we have continued to donate thousands of
sport tickets to schools and junior club sports teams
throughout New Zealand.
This year we’ve been delighted to launch a number
of new initiatives that have been designed to make
a positive difference to New Zealand’s sport and
creative sector and our local communities.
26
Sky Sport Next
Sky Sport Next was launched in
November 2019 in partnership with
the New Zealand Sport Collective.
This initiative gives more than 50 rising
and grassroots sports a greater profile in
the community to drive awareness and
participation. We do this by funding filming
and streaming from diverse events such
as Badminton and Basketball to Condor
Sevens, Golf Croquet, Canoe Racing,
Equestrian, Athletics and Water Polo. Tens
of thousands of New Zealanders have been
able to watch up and coming athletes of all
ages compete at events throughout New
Zealand on the free to access Sky Sport Next
YouTube channel. From time to time events
have also been screened on Sky Sport and
free to access on Prime.
Sky Community
Advertising
While New Zealand was in
COVID-19 lockdown in April, our
people pulled together to quickly
launch Sky Community Advertising,
an initiative designed to help raise
the profile of organisations making
a real difference in Kiwis lives,
particularly during COVID-19.
Since then, we’ve donated $1.9 million
of TV advertising airtime to community
groups working across a wide range of
causes - from youth development, health
and wellbeing, and domestic violence,
to organisations that support the arts,
small business and rural sectors.
Having received such a positive response,
we’ve since extended our offer to more
organisations who applied for Sky
Community Advertising and will continue
to do so over the months ahead to
make the biggest difference possible.
Sky Sport Next is an
initiative supporting
rising talent and
grassroots sport
across New Zealand.
Showcasing over 50 sporting
codes and 1000’s of sporting
events.
Doing our bit to help,
through COVID-19
and beyond.
Sky has donated airtime to:
• White Ribbon
• Make-a-Wish Foundation
• Manaaki
• Rural Support Trust
• Read NZ Te Pou Muramura
• MusicHelps
• Graeme Dingle Foundation
• National Foundation for
Deaf & Hard of Hearing
• Mentemia
• Leukaemia & Blood Cancer
• NZ KidsCan
• The Student Volunteer Army
• Pet Refuge
• Starship Foundation
• Age Concern NZ
• Bowel Cancer NZ
• Ronald McDonald House
• UNICEF
• Fred Hollows Foundation
• Halberg Foundation
• Prostate Cancer Foundation
of New Zealand
27
Sky / 2020 Annual Report Our Board of Directors
Philip Bowman
INDEPENDENT CHAIRMAN
Martin Stewart
CHIEF EXECUTIVE & DIRECTOR
Geraldine McBride
INDEPENDENT DIRECTOR
Derek Handley
INDEPENDENT DIRECTOR
Martin joined Sky as Chief
Executive in February 2019 and
was appointed to the Board in
April 2019. A highly-regarded
media sector operator with
a wealth of experience in the
UK, Europe and the Middle
East, Martin brings a valuable
international perspective
to Sky. In the Media and
Communications space Martin
has been CEO of OSN, the
leading pay TV network in the
Middle East and was CFO of
Sky in the United Kingdom when
Sky launched its digital platform
and the company doubled its
subscriber base in 4 years. Other
major roles include CFO of the
Football Association in the UK,
CEO of ONO (Cable Europa in
Madrid), and CFO and Executive
Director of EMI Group.
Geraldine was appointed
to the Board in September
2013. A renowned Enterprise
Business Technology and AI
thought leader with a science
background, Geraldine’s global
career spans 30 years, with
senior executive roles in IBM,
Dell and SAP. Her most recent
roles were President & CEO of
SAP North America and SAP
Asia Pacific Japan. Geraldine is
a Director of National Australia
Bank, and Fisher and Paykel
Healthcare. She is also CEO
& Director of MyWave.AI, a
market leading Enterprise AI
company focused on Intelligent
Personalisation by putting
the customer at the centre of
business.
Derek was appointed to the
Board in September 2013.
He is a New Zealand-based
entrepreneur and founding
General Partner at Aera VC, a
global venture capital investor
backing deep-technology start-
ups tackling the United Nations
Sustainable Development
Goals across the future of
climate, carbon, food, health,
work and learning. For the
last ten years, while based in
New York Derek co-created
companies and platforms
delivering social impact and
environmental transformation.
He co-founded the sustainability
alliance, ‘The B Team’ with Sir
Richard Branson and helped
build NY-based start-up studio
‘Human Ventures’. Previously
Derek was named in the ‘Silicon
Alley 100’ most influential
technology people in New York.
He is Adjunct Professor at AUT
University in Auckland, was a
formative member of the Air
New Zealand Sustainability
Advisory Panel, and is an
aspiring civilian astronaut with
Virgin Galactic. Derek also
created the Aera Foundation,
a charitable studio advancing
new models that fuse social and
financial goals.
Philip was appointed Chair of
Sky in September 2019. Philip
is a distinguished businessman
who has led several major global
companies and served on the
Board of a significant number
of public and private companies.
Philip brings knowledge of the
media sector, including having
served on the Board of Sky
UK for ten years. Other roles
include Group Finance Director
of Bass, CEO of Bass Retail,
CEO of Allied Domecq, CEO of
Scottish Power, CEO of Smiths
Group, senior non-executive
director of Burberry, Chairman
of Liberty, Chairman of Coral
Eurobet, Chairman of Miller
Group, and non-executive
director of Scottish & Newcastle.
He currently sits on the Boards
of two other listed companies,
Kathmandu and Ferrovial SA.
Philip has a degree with honours
in Natural Sciences (University
of Cambridge) and Master in
Natural Sciences (University of
Cambridge). He is also a Fellow
of the Institute of Chartered
Accountants of England and
Wales.
28
Susan Paterson ONZM
INDEPENDENT DIRECTOR
Mike Darcey
INDEPENDENT DIRECTOR
Joan Withers
INDEPENDENT DIRECTOR
Keith Smith
INDEPENDENT DIRECTOR
Keith was appointed to the
Board in April 2020. He has
a long-standing record of
leadership as a director and
advisor to companies in a
diverse range of industries,
including the energy sector,
rural services, printing, media
and exporting. Keith is Chair
of listed company Goodman
(NZ) Limited (the Manager
of Goodman Property Trust),
Deputy Chair of The Warehouse
Group Limited, and is a director
of Mercury NZ Ltd and several
other private companies. He is a
past President of the Chartered
Accountants Australia and New
Zealand.
With an extensive track record
of strategy and delivery across
television, publishing and
technology, Mike was appointed
to the Board in September
2017. A New Zealander, he has
lived and worked in the UK
since 1989. Fifteen of those
years were spent at Sky UK,
initially as the Director of
Strategy, then six years as Chief
Operating Officer. He played a
prominent role in most of Sky
UK’s major strategic decisions
and its major commercial and
regulatory dealings during this
period. From 2013 to 2015 Mike
was CEO of News UK. Since
2015, Mike has had a series of
non-executive roles and these
currently include Chairman of
M247 (a global connectivity
and cloud services provider),
Chairman of British Gymnastics,
and director of Arqiva (the UK’s
main independent provider of
television broadcast and mobile
infrastructure). He also provides
strategic consulting services in
the media sector.
Joan was appointed to the
Board in September 2019. She
brings a wealth of experience
spanning a 25-year career in
the media industry, including
CEO positions at Fairfax and
the Radio Network as well as
being the former Chair of TVNZ.
Joan’s depth of governance
experience includes her current
roles as Chair of The Warehouse
Group, a director of ANZ
NZ, and previously Chair of
Auckland International Airport
and Mercury NZ Ltd. Joan is a
Trustee of the Louise Perkins
Foundation, and is Chair of a
steering committee working
to increase the percentage
of South Auckland Maori and
Pacific Island students taking
up roles in the health sector.
She holds a Masters Degree in
Business Administration from
the University of Auckland.
In 2015 Joan was named
Supreme Winner in the Women
of Influence Awards and was
named as Chairperson of the
Year in the Deloitte Top 200
Management Awards.
Susan was appointed to the
Sky Board in August 2015.
Susan began her career as a
pharmacist and later completed
a MBA at London Business
School, leading to a career in
management and strategy
consulting in New Zealand,
Europe and the United States
of America. She has been a
professional director for over 20
years, and is a Chartered Fellow
of the Institute of Directors.
Susan is Chair of Steel and
Tube and Theta, and a director
of Goodman NZ, Arvida Group,
ERoad, Les Mills NZ and the
Reserve Bank of New Zealand.
She is also a Member of the
Electricity Authority, and past
director or Chair of a number
of commercial infrastructure
and growth companies and
not for profit entities including
Airways Corp, Transpower
New Zealand, Abano Healthcare,
Housing New Zealand, Home
of Cycling (Avantidrome), NZ
Golf Board, Auckland Hockey,
the NZ Eco-Labelling Trust, St.
Cuthbert’s College and EECA.
Previously she was an external
Monetary Policy Advisor to the
Reserve Bank Governor. In 2015
Susan was made an Officer of
the New Zealand Order of Merit
for her services to corporate
governance.
Susan will conclude her term on
the Sky Board in October 2020
and has chosen not to seek
re-election at the forthcoming
Annual General Meeting.
29
Sky / 2020 Annual Report 30
Our 2020
Financials
For the year ended 30 June 2020
Financial Overview ................................................................................................ 32
Financial Performance Trends .................................................................... 38
Directors’ Responsibility Statement ..................................................... 39
Consolidated Income Statement ............................................................ 41
Consolidated Statement of Comprehensive Income ...........42
Consolidated Balance Sheet .......................................................................43
Consolidated Statement of Changes in Equity .........................44
Consolidated Statement of Cash Flows ..........................................45
Notes to the Consolidated Financial Statements ...................46
Independent Auditor's Report ...................................................................87
31
Sky / 2020 Annual Report Financial Overview
Summary
The 2020 financial year began well for Sky with pleasing progress on strategy and positive momentum building within the business.
The onset of the COVID-19 pandemic in the second half of the year presented challenges for the business, and Sky’s operations
were swiftly adapted to deal with the immediate and ongoing implications. As a result, Sky was able to continue to operate as an
essential service and worked to minimise the impact on customers, staff and Sky’s financial performance while also strengthening
our funding position for the longer term.
The net loss after tax for the year ended 30 June 2020 was $156.8 million compared to a net loss of $607.8 million in the prior
year. The net loss includes a goodwill impairment charge of $177.5 million (prior year $670.0 million). Earnings before interest, tax,
depreciation and amortisation are $164.2million compared to $230.1 million in the prior year.
However, the adjusted results are in line with our expectations after confronting the impacts of COVID-19, with adjusted net
profit after tax of $41.0 million, compared to an adjusted net profit after tax of $97.4 million in the prior year. COVID-19 affected
many aspects of Sky’s business in the final quarter of FY20, including a reduction in advertising and commercial revenues. Some of
that reduction was offset by revenue from acquired businesses Lightbox and RugbyPass, and a reduction in satellite revenue was
partially offset by a growth in streaming revenue. Satellite revenue decline was driven mainly by lower satellite customers during
the period.
As foreshadowed in the investor presentation released on 21 May 2020, Sky has continued to review the assumptions underlying
the carrying value of goodwill during the balance of the reporting period. The Board is required to assess the fair value of intangible
assets at each reporting period and has decided to recognise a further $177.5 million impairment of goodwill. The Board’s
decision reflects the ongoing uncertainty of the impacts of COVID-19 on Sky, supported by an independent valuation undertaken
subsequent to its 21 May 2020 disclosure, and with reference to the current market share price. The impairment of goodwill is a
non-cash charge that had no impact on Sky’s 2020 cash flows or any of its bank covenants.
Along with implementing its strategy to enhance streaming services and serve satellite customers, Sky has undertaken a
significant transformation of its business in FY20. Sky has repositioned to be a modern multimedia company, with this
revitalised focus leading to changes in our structure and expansion into new opportunities for growth, including our plans to
offer a broadband service. Alongside these changes, Sky is maintaining a sharp focus on costs with these initiatives leading
to ongoing reductions in operating and capital expenditure.
Costs incurred in FY20 included a number of one-off costs totalling $28.2 million, including redundancy costs, non-recurring
consultancy fees, satellite reservation fees and content write-offs. Prior year adjustments include costs relating to the decision
to cancel the infinite video platform (IVP) project, content write-offs, redundancy and consultancy payments.
Non-GAAP Financial Information
Sky has used non-GAAP profit measures when discussing financial performance (refer to note 32 of the Financial Statements).
The directors and management believe that these measures provide useful information on the underlying performance of the
Group. They are used internally to evaluate performance, analyse trends, and allocate resources. Non GAAP financial measures
are not prepared in accordance with NZ IFRS and are not uniformly defined and therefore should not be viewed in isolation nor
considered as a substitute for measures reported in accordance with NZ IFRS.
The adjustments are summarised below:
For the years ended 30 June
in NZD millions
Financial performance data
Total revenue
Total operating expenses
EBITDA
Less
2020
(adjusted)
2020
(reported)
2019
(adjusted)
2019
(reported)
%
inc/(dec)
747.6
555.2
192.4
747.6
583.4
164.2
795.1
554.1
241.0
795.1
565.0
230.1
(6.0)
0.2
(20.2)
Depreciation, amortisation and impairment
119.3
119.3
93.0
131.1
28.3
Net operating profit before interest, income tax
and impairment of goodwill
Impairment of goodwill
Net finance costs
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax
32
73.1
-
13.7
59.4
18.4
41.0
44.9
177.5
13.7
(146.3)
10.5
(156.8)
148.0
-
12.4
135.6
38.2
97.4
99.0
670.0
12.4
(583.4)
24.4
(607.8)
(50.6)
-
10.5
(56.2)
(51.8)
(57.9)
Summary of Adjustments
The adjustments do not account for the impacts of acquiring RugbyPass and Lightbox during the year or for the impacts of
COVID-19. Information on the acquisition of RugbyPass and Lightbox can be found in Note 27 of the Financial Statements and
the impacts of COVID-19 are discussed in Note 3 of the Financial Statements.
In NZD millions
Statutory loss after tax
Adjustments to earnings as follows:
Content write-offs
Non-recurring costs included in other costs (1)
Impairment of property, plant and equipment
Cancellation of IVP project
Impairment of goodwill
Tax effect of adjustments
Total adjustments
Adjusted profit after tax
30-Jun-20
30-Jun-19
(156.8)
(607.8)
3.2
25.0
-
-
177.5
(7.9)
197.8
41.0
5.7
5.0
4.8
33.4
670.0
(13.7)
705.2
97.4
(1) Adjustments for non-recurring costs include redundancy costs of $15.5 million and Holidays Act compliance provision of $3.2 million (refer notes 5
and 26), non-recurring consultancy costs of $3.3 million and satellite reservation fee of $3.0 million.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ended 30 June 2020 are $192.4 million,
a decrease of 20.2% on the previous year’s comparative of $241.0 million.
EBITDA was impacted by the adoption of NZ IFRS 16 leases from 1 July 2019 as per the table below:
In NZD millions
Operating expenses - previously reported in EBITDA
Depreciation on right-of-use assets
Interest on finance liabilities
Cash flow - reduction of liability
30-Jun-20
40.3
33.6
3.4
36.9
Adjusted net operating profit before interest and tax decreased from $148.0 million to $73.1 million.
33
Sky / 2020 Annual Report Customers
Sky delivers sport and entertainment content to customers through satellite and streaming services. Since the beginning of the
2020 financial year, Sky accelerated its focus on growing its streaming customer base while continuing to serve satellite customers.
Total customer numbers returned to growth in FY19 and significantly increased in FY20 through organic growth of the Neon and
Sky Sport Now streaming products and through the acquisition of RugbyPass and Lightbox, with improved retention of satellite
customers also making a positive contribution.
Average revenue per user (ARPU) for satellite customers continued to reduce slightly and was impacted in the final quarter of FY20
by COVID-19.
Satellite customers (1)
Streaming customers (2)
Other customers (3)
Total customers
Net customer growth - satellite
Net customer growth - streaming
Satellite acquisition (4)
Satellite churn (4)
Satellite ARPU (monthly) (5)
Streaming ARPU (monthly) (6)
2020
2019
2018
2017
2016
585,248
619,073
661,361
705,652
739,558
404,321
159,767
106,366
110,861
-
-
-
8,269
91,218
21,903
989,569
778,840
767,727
824,782
852,679
-5%
153%
41,510
(75,643)
$82.08
$19.80
-6%
50%
-6%
-4%
-5%
22%
49,952
59,603
79,685
-9%
121%
88,957
(91,841)
(103,394)
(113,226)
(131,401)
$83.46
$84.54
$85.05
$86.59
-
-
-
-
(1) Satellite customer groups comprise residential satellite customers including reseller and commercial.
(2) Streaming customer group comprise Neon, Lightbox, Sky Sport Now (formerly FanPass), RugbyPass and retransmission.
(3) Other customers include customers from non-trading businesses, IGLOO and Fatso.
(4) Satellite acquisition and churn is for Sky residential customers only, including reseller.
(5) Satellite subscription ARPU is average revenue per user for Sky residential customers only, including reseller customers, calculated as the average
for the twelve-month period.
(6) Streaming subscription ARPU is the blended rate across Neon, Lightbox, Sky Sport Now (formerly FanPass), RugbyPass and retransmission.
34
Financial Commentary (Continued) Revenue Analysis
Sky’s total revenue was $747.6 million, as follows:
In NZD millions
Residential satellite subscriptions (1)
Other subscriptions (2)
Total subscription revenue
Advertising
Other revenue and other income
Total other revenue
Total revenue
2020
582.0
105.4
687.4
45.2
15.0
60.2
747.6
2019
% inc/(dec)
629.8
98.6
728.4
51.8
14.9
66.7
795.1
(7.6)
6.9
(5.6)
(12.7)
0.7
(9.6)
(6.0)
(1) Residential satellite subscriptions include residential satellite customers and reseller customers.
(2) Other subscriptions include Neon, Lightbox, Sky Sport Now, RugbyPass, retransmission and commercial customers.
The COVID-19 pandemic and the associated restrictions on movement, travel and gatherings adversely impacted Sky’s revenue
during the final quarter of FY20.
Sky took a proactive approach with commercial customers (e.g. hotels, motels, restaurants and bars), including discounting or
suspending charging on a case by case basis for customers impacted by lockdown and gathering restrictions. A return to normal
billing practices commenced for the majority of customers from 1 August 2020, with additional support provided later that month
for customers in the Auckland region impacted by a further period of Level 3 restrictions.
Advertising revenues were subdued through the last quarter of FY20, due to market uncertainty surrounding COVID-19 as well as
the absence of live sport. The availability of sport content also impacted on Sky’s residential customer base with a portion of Sky
Sport Now streaming customers electing to pause subscriptions and 8% of satellite customers that subscribe to sport electing
to downgrade their packages. Sky’s satellite sport subscribers were offered complimentary upgrades that reduced the extent of
downgrades, with this initiative well received by customers. The return of live sport events during May saw most satellite sport
customers return by year-end and delivered a strong increase in Sky Sport Now subscriptions.
In contrast, increased demand for entertainment content during the Level 3 and 4 lockdown period resulted in strong growth for
Sky’s entertainment streaming services, Neon and Lightbox.
Sky’s programming costs were lower than anticipated as sport production costs were avoided through the COVID-19 impacted
period. Sky also worked closely with key sport partners to negotiate equitable reductions for COVID-19 impacted sport payments
in 2020.
Residential satellite subscriptions revenue decreased by 7.6% to $582.0 million due to fewer satellite customers, a lower uptake
of premium services (sport and movies) and lower pay-per-view buys. A continuing focus on customer retention saw a 21%
improvement in net annual churn rates as targeted initiatives gained traction.
Other subscriptions revenue includes commercial revenue earned from Sky subscriptions at hotels, motels, restaurants and bars
throughout New Zealand, revenue derived from transmission of programming for third parties and revenue from streaming
subscription services such as Neon, Lightbox, Sky Sport Now and RugbyPass. This revenue increased 6.9% to $105.4 million in 2020
due mainly to an increase in subscriber numbers for Sky’s streaming services from the acquisitions of RugbyPass and Lightbox.
Advertising revenue decreased by 12.7% to $45.2 million in 2020 due to a general weakening of market conditions for advertising
expenditure and impacts of COVID-19.
Other revenue and other income increased marginally by 1.3% to $15.0 million in 2020 mainly due to an increase in satellite access
fees received.
35
Sky / 2020 Annual Report Expense Analysis
A further breakdown of Sky’s operating expenses for 2020 and 2019 is provided below:
In NZD millions
Programming
Subscriber related costs
Broadcasting and
infrastructure
Other costs
Depreciation, amortisation
and impairment
Total operating expenses
30-Jun-20
30-Jun-19
Adjusted
Reported
% inc/(dec) % of revenue
Adjusted
Reported % of revenue
335.5
101.9
70.3
47.5
342.1
106.6
77.9
56.8
119.3
119.3
674.5
702.7
4.6
15.4
(26.6)
(3.3)
28.3
4.3
44.9
13.6
9.4
6.4
16.0
90.2
320.8
326.5
88.3
95.8
49.2
93.0
88.3
95.8
54.3
131.1
647.1
696.0
40.3
11.1
12.0
6.2
11.7
81.4
Programming costs comprise both the costs of purchasing programme rights and also programme operating costs. Programme
rights costs include the costs of sport rights, pass-through channel rights (e.g. ESPN, Living Channel, National Geographic etc.),
movies (including pay-per-view), streaming rights and music rights. Programme operating costs include the costs of producing live
sport events, satellite and fibre linking costs and original shows produced in-house.
Sky’s adjusted programming costs have increased by $14.7 million and equate to 44.9% of revenue in 2020, up from 40.3% in 2019.
The increase is mainly due to the rights costs of $16.7 million relating to the acquisitions of RugbyPass and Lightbox. Adjusted
programming costs exclude impairment of RugbyPass and other entertainment programme rights of $3.2 million (refer note 9 of
the Financial Statements) and redundancy costs of $3.4 million.
Subscriber related costs include the costs of servicing and monitoring equipment installed at subscribers’ homes, indirect
installation costs, the costs of Sky’s customer service department, sales and marketing costs and general administrative costs
associated with managing the subscriber relationship.
In 2020, subscriber related costs increased by 15.4% due to an increase in sales and marketing costs as Sky implemented initiatives
to attract and grow streaming subscribers. Adjusted subscriber related costs exclude redundancy costs of $4.7 million.
Broadcasting and infrastructure costs consist of transmission and linking costs for transmitting Sky and Prime’s content from
its studios in Auckland to customers over satellite, streaming and other distribution platforms and the costs of operating Sky’s
television stations at Mt Wellington and Albany.
Sky’s broadcasting and infrastructure costs are detailed below:
In NZD millions
Broadcasting and infrastructure
Optus lease expense
Satellite reservation fees
Redundancy
2020
70.3
-
3.0
4.6
77.9
2019
63.1
32.7
-
-
95.8
The change from 2019 mainly reflects the effect of the adoption of NZ IFRS 16 from 1 July 2019. Optus lease costs are
now expensed as depreciation and interest, whereas previously the cost was an operating cost included in broadcasting and
infrastructure costs. Other adjustments included a one-off satellite reservation fee incurred while Sky worked through the future of
the Optus satellite of $3.0 million and redundancy costs of $4.6 million. The remaining increase is due to costs relating to internet
delivery costs and support for Sky’s streaming services, Neon, Lightbox, Sky Sport Now and RugbyPass.
Other costs include advertising costs and the overhead costs relating to corporate management of the Sky Group including
consultancy costs. The adjusted other costs have decreased by 3.3% to $47.5 million. Adjusted other costs exclude redundancy
costs of $2.7 million, $3.2 million Holidays Act compliance provision and $3.3 million of one-off consultancy costs.
36
Financial Commentary (Continued) Depreciation, amortisation and impairment costs include depreciation charges for subscriber equipment including satellite
dishes and decoders owned by Sky, fixed assets such as television station facilities, amortisation of the right-of-use assets created
under NZ IFRS 16 and amortisation of computer software and intangible assets. The current year includes depreciation relating
to right-of-use assets of $33.6 million. This increase offsets the prior year impairment cost for the infinite video platform (IVP) of
$38.2 million. Depreciation of property, plant and equipment has decreased as decoders and installation costs reach the end of
their useful lives while amortisation of intangibles has increased in relation to acquired intangibles for Lightbox and RugbyPass.
Depreciation, amortisation and impairment costs are summarised below:
In NZD millions
Depreciation of property, plant and equipment
Amortisation of intangibles
Depreciation of right-of-use assets
Impairment of IVP project
Total depreciation, amortisation and impairment
2020
54.7
31.0
33.6
-
119.3
2019
70.9
22.0
-
38.2
131.1
Finance costs, net have increased from $12.4 million to $13.7 million. The increase relates to interest of $3.4 million on lease
liabilities as a result of adopting NZ IFRS 16 lease accounting on 1 July 2019. This is partially offset by a reduction in interest as
debt levels have reduced throughout the year. Sky’s weighted average interest rates are as follows:
Borrowings
Bonds
Lease liabilities
Combined weighted average
Capital expenditure
Sky’s capital expenditure over the last two years ended 30 June is summarised as follows:
In NZD millions
Subscriber equipment
Installation costs
Projects under development
Software
Other
Capital expenditure
Assets acquired by way of business acquisitions
Total capital expenditure
2020
5.42%
6.16%
4.30%
5.21%
2020
4.4
12.6
11.7
19.7
8.1
56.5
16.4
72.9
2019
6.52%
6.13%
-
6.34%
2019
7.3
15.5
34.5
10.0
9.0
76.3
-
76.3
Sky has a stated objective to manage capital expenditure within a target band of 7% - 9% of revenue, with FY20 spending of 7.6%
comfortably within this range. The average over the past five years has been 9.6% with this year’s performance contributing to a
positive downward trend.
Capital expenditure had a greater emphasis on Sky’s streaming services in 2020, and less on costs associated with Sky’s satellite
delivery platform.
This approach is consistent with Sky’s accelerated focus on streaming, requiring additional investment in the Sky Go, Sky Sport
Now and Neon platforms which led to an increase in expenditure included as software within intangible assets.
Satellite installation costs and subscriber equipment costs decreased by 25.4%. Capital expenditure in FY19 included expenditure
for the IVP project that was subsequently discontinued. Assets acquired by way of business acquisitions include the Lightbox
streaming platform and other intangible assets.
37
Sky / 2020 Annual Report Financial Performance
Trends (as reported)
In NZD 000
For the year ended 30 June
Income statement
Total revenue
Total operating expenses
EBITDA (1)
Depreciation, amortisation and impairment (2)
Impairment of goodwill
Net interest expense and financing charges
Losses/(gains) on currency and other
Net (loss)/profit before income tax
Balance sheet
Property, plant,and equipment, intangibles and
right-of-use assets
Goodwill
Total assets
Interest bearing loans and liabilities
Working capital (3)
Total liabilities
Total equity
Cash flow
Net cash from operating activities
Net cash used in investing activities
Free cash flow
Capital expenditure
Capital expenditure
Assets acquired by way of business combination (4)
Total capital expenditure
2020
2019
2018
2017
2016
747,646
583,395
795,126
564,958
852,710
566,900
893,485
601,145
928,200
602,914
164,251
230,168
285,810
292,340
325,286
119,318
177,500
15,859
(2,120)
131,103
670,000
13,650
(1,208)
102,414
360,000
17,576
105,148
100,241
-
-
20,470
19,684
(66)
(850)
371
(146,306)
(583,377)
(194,114)
167,572
204,990
287,962
256,312
837,936
212,513
90,291
462,966
374,970
213,702
395,331
268,925
301,008
331,157
1,065,331
1,425,331
1,425,331
771,353
1,503,002
1,887,200
1,943,564
193,662
235,344
298,663
348,085
8,607
9,038
10,215
30,945
419,785
476,315
559,322
612,641
351,568
1,026,687
1,327,878
1,330,923
157,300
178,026
213,613
244,536
275,844
(74,627)
(69,780)
(58,194)
(79,640)
(133,635)
82,673
108,246
155,419
164,896
142,209
56,458
16,354
72,812
76,300
58,200
79,700
128,800
-
-
-
-
76,300
58,200
79,700
128,800
(1) Earnings before income tax, interest expense, depreciation, amortisation and impairment, unrealised gains and losses on currency and interest
rate swaps.
(2) The 2020 year includes depreciation on right-of-use assets of $33.6 million. (refer note 13). The 2019 year includes impairment of property, plant
and equipment of $38.2 million relating to the cancellation of the infinite video platform (IVP) and related decoders and equipment (refer note 12).
(3) Working capital excludes current borrowing, bonds, derivative financial instruments, available for sale financial assets and contract liabilities and
lease liabilities. Prior periods have been adjusted to exclude contract liabilities.
(4) RugbyPass and Lightbox, acquired in the 2020 financial year (refer note 27), were the only substantial acquisitions in the last five years.
38
Directors’ Responsibility
Statement
The directors of Sky Network Television Limited (Sky) are responsible for ensuring that the consolidated
financial statements of Sky and its subsidiaries (the Group) present fairly the financial position of the Group
as at 30 June 2020 and the results of its operations and cash flows for the year ended on that date.
The directors consider that the consolidated financial statements of the Group have been prepared using
appropriate accounting policies, consistently applied and supported by reasonable judgements and estimates
and that all relevant financial reporting and accounting standards have been followed.
The directors believe that proper accounting records have been kept which enable, with reasonable accuracy,
the determination of the financial position of the Group and facilitate compliance of the consolidated financial
statements with the Financial Markets Conduct Act 2013.
The directors consider they have taken adequate steps to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
The directors present the consolidated financial statements of the Group for the year ended 30 June 2020.
The Board of Directors of Sky authorise these financial statements for issue on 9 September 2020.
For and on behalf of the Board of Directors
Philip Bowman
Director and Chairman
Martin Stewart
Director and Chief Executive
Date: 9 September 2020
39
Sky / 2020 Annual Report
Contents
Financial Statements
Funding
Consolidated Income Statement ..................................................41
16. Borrowings ...................................................................................67
Consolidated Statement of Comprehensive Income .............. 42
17. Lease Liabilities ...........................................................................69
Consolidated Balance Sheet ......................................................... 43
18. Finance Costs, Net .....................................................................70
Consolidated Statement of Changes in Equity ........................ 44
19. Share Capital ..............................................................................71
Consolidated Statement of Cash Flows .................................... 45
20. Reserves ........................................................................................72
Basis of Preparation
Financial Risk Management
1. General Information.................................................................... 46
21. Derivative Financial Instruments ............................................73
2. Basis of Consolidation ................................................................ 47
22. Financial Risk Management - Market Risk............................76
3. Significant Accounting Policies and
23. Credit Risk ....................................................................................77
Key Sources of Estimation Uncertainty .................................. 47
24. Liquidity Risk ................................................................................78
Performance
25. Classification of Financial Instruments .................................81
4. Segment and Revenue Information ........................................ 50
Other
5. Operating Expenses .................................................................... 52
26. Contingent Consideration and Provisions ............................82
6. Earnings Per Share ...................................................................... 53
27. Business Acquisitions .................................................................83
7. Taxation ......................................................................................... 53
28. Related Parties ...........................................................................84
Working Capital
29. Commitments .............................................................................85
8. Trade and Other Receivables .................................................... 55
30. Contingent Liabilities ................................................................86
9. Programme Rights Inventory .................................................... 57
31. Subsequent Events ....................................................................86
10. Trade and Other Payables and Contract Liabilities .......... 58
32. Non-GAAP Financial Information ...........................................86
Assets
11. Assets Held for Sale .................................................................. 58
12. Property, Plant and Equipment.............................................. 59
13. Right-Of-Use Assets ................................................................. 61
14. Intangible Assets ....................................................................... 62
15. Goodwill ....................................................................................... 63
Independent Auditor's Report........................................................87
40
Notes
30-Jun-20
Consolidated
Income Statement
For the year ended 30 June 2020
In NZD 000
Revenue
Other income
Total revenue
Expenses
Programming
Subscriber related costs
Broadcasting and infrastructure
Depreciation, amortisation and impairment of assets
Other costs
Total expenses
Operating profit before impairment
Impairment of goodwill
Operating loss
Finance costs (net)
Loss before tax
Income tax expense
Loss for the year
Attributable to
Equity holders of the Company
Non-controlling interests
Loss per share
Basic and diluted loss per share (cents)
4
5
5,15
18
7
6
6
746,641
1,005
747,646
342,096
106,554
77,942
119,318
56,803
702,713
44,933
177,500
(132,567)
13,739
(146,306)
10,466
(156,772)
(156,979)
207
(156,772)
30-Jun-19
795,126
-
795,126
326,461
88,323
95,846
131,103
54,328
696,061
99,065
670,000
(570,935)
12,442
(583,377)
24,460
(607,837)
(608,158)
321
(607,837)
(23.91)
(119.99)
41
Sky / 2020 Annual Report Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2020
In NZD 000
Loss for the year
Items that may be reclassified to profit or loss
Exchange difference on translation of foreign operations
Deferred hedging gains/ (losses) transferred to operating expenses during the year
Income tax effect
Net other comprehensive income/(loss) to be reclassified to profit or loss,
net of income tax
Items that may not be reclassified to profit and loss
Deferred hedging losses transferred to non-financial assets during the year
Income tax effect
Net other comprehensive loss not being reclassified to profit or loss,
net of income tax
Total comprehensive loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interest
30-Jun-20
(156,772)
30-Jun-19
(607,837)
220
1,196
(335)
1,081
(51)
14
(37)
(155,728)
(155,935)
207
(155,728)
-
(2,745)
769
(1,976)
(10,097)
2,827
(7,270)
(617,083)
(617,404)
321
(617,083)
42
Consolidated
Balance Sheet
As at 30 June 2020
In NZD 000
Current assets
Cash and cash equivalents
Trade and other receivables
Programme rights inventory
Derivative financial instruments
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax asset
Goodwill
Derivative financial instruments
Assets held for sale
Total assets
Current liabilities
Interest bearing loans and borrowings
Lease liabilities
Trade and other payables
Contract liabilities
Income tax payable
Derivative financial instruments
Non-current liabilities
Interest bearing loans and borrowings
Lease liabilities
Contingent consideration
Deferred tax liability
Derivative financial instruments
Liabilities associated with assets held for sale
Total liabilities
Equity
Share capital
Reserves
Retained deficit
Total equity attributable to equity holders of the Company
Non-controlling interest
Total equity
Total equity and liabilities
Notes
30-Jun-20
30-Jun-19
8
9
21
12
13
14
7
15
21
11
16
17
10
10
21
16
17
26
7
21
11
19
20
110,677
56,854
113,822
3,265
284,618
124,585
96,821
66,556
216
256,312
461
544,951
8,367
837,936
100,765
36,562
176,021
51,180
15,041
922
380,491
1,883
73,303
5,283
-
405
80,874
1,601
462,966
767,608
991
(394,875)
373,724
1,246
374,970
837,936
4,283
61,996
89,458
5,019
160,756
163,217
-
50,485
-
395,331
1,564
610,597
-
771,353
1,701
-
136,078
54,396
11,052
2,721
205,948
191,961
-
-
18,924
2,952
213,837
-
419,785
577,403
(53)
(227,111)
350,239
1,329
351,568
771,353
43
Philip Bowman
Director and Chairman
Martin Stewart
Director and Chief Executive
For and on behalf of the Board 9 September 2020
Sky / 2020 Annual Report Consolidated Statement
of Changes in Equity
For the year ended 30 June 2020
In NZD 000
Notes
Share
capital
Reserves
Retained
deficit
Non-
controlling
interest
Total
Total
equity
Attributable to owners of the parent
For the year ended 30 June 2020
Balance at 1 July 2019
Impact of adoption of
new accounting standard
Adjusted balance
Loss for the year
Exchange difference on translation
of foreign operations
Cash flow hedges, net of tax
20
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Rights issue and placement of shares
19
157,091
577,403
(53)
(227,111)
350,239
1,329
351,568
3
-
-
(10,785)
(10,785)
-
(10,785)
577,403
(53)
(237,896)
339,454
1,329
340,783
-
-
-
-
-
(156,979)
(156,979)
207
(156,772)
220
824
-
-
220
824
-
-
220
824
1,044
(156,979)
(155,935)
207
(155,728)
Issue of ordinary shares related
to business combination
Issue of ordinary shares to
NZ Rugby Union
Transaction costs relating
to share issues
Dividend paid
CEO share based remuneration
Balance at 30 June 2020
For the year ended 30 June 2019
Balance at 1 July 2018
Reversal of deferred tax on
held for sale investment
Balance at 1 July 2018 (restated)
Loss for the year
Cash flow hedges, net of tax
20
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Dividend paid
Supplementary dividends
Foreign investor tax credits
CEO share based remuneration
19,28
19
24,378
9,19
15,436
19
28
(7,086)
-
386
190,205
767,608
-
-
-
-
-
-
-
-
-
-
-
-
-
-
157,091
24,378
15,436
(7,086)
-
386
-
-
-
-
(290)
-
157,091
24,378
15,436
(7,086)
(290)
386
190,205
(290)
189,915
991
(394,875)
373,724
1,246
374,970
577,403
9,032
438,998
1,025,433
1,254
1,026,687
-
-
420
420
-
420
577,403
9,032
439,418
1,025,853
1,254
1,027,107
-
-
-
-
-
-
-
-
-
(608,158)
(608,158)
321
(607,837)
(9,246)
-
(9,246)
-
(9,246)
(9,246)
(608,158)
(617,404)
321
(617,083)
-
-
-
161
161
(58,371)
(58,371)
(246)
(58,617)
(8,552)
8,552
-
(8,552)
8,552
161
-
-
-
(8,552)
8,552
161
(58,371)
(58,210)
(246)
(58,456)
Balance at 30 June 2019
577,403
(53)
(227,111)
350,239
1,329
351,568
44
Consolidated Statement
of Cash Flows
For the year ended 30 June 2020
In NZD 000
Cash flows from operating activities
Loss before tax
Adjustments for:
Depreciation and amortisation
Impairment of goodwill
Impairment of programme rights
Unrealised foreign exchange loss/(gain)
Interest expense
Bad debts and movement in provision for loss allowance
Other non-cash items
Movement in working capital items:
Decrease/(increase) in receivables
Increase in payables
Increase in programme rights
Cash generated from operations
Interest paid
Bank facility fees paid
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant, and equipment
Acquisition of intangibles
Acquisition of subsidiaries,net of cash acquired
Disposal of held for sale financial asset
Net cash used in investing activities
Cash flows from financing activities
Proceeds from rights issue and placement of shares
Transaction costs incurred for rights issue
Repayment of borrowings - bank loan
Advances received - bank loan
Vendor finance received
Repayment of other borrowings
Payments for lease liability principal
Dividend paid to minority shareholders
Dividends paid
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
30-Jun-20
30-Jun-19
(146,306)
(583,377)
5
5
9
18
18
5
12
14
27
11
19
19
16
16
16
16
17
119,318
177,500
3,240
1,953
16,020
1,352
1,040
10,128
17,631
(5,056)
196,820
(15,995)
(25)
(23,500)
157,300
-
(27,470)
(28,988)
(18,169)
-
(74,627)
157,091
(7,086)
(207,000)
119,000
-
(1,093)
(36,901)
(290)
-
23,721
106,394
4,283
110,677
131,103
670,000
5,715
(258)
13,895
1,186
605
(65)
5,362
(16,795)
227,371
(14,045)
(800)
(34,500)
178,026
228
(66,307)
(10,035)
-
6,334
(69,780)
-
-
(300,000)
257,000
3,205
(1,693)
-
(246)
(66,923)
(108,657)
(411)
4,694
4,283
45
Sky / 2020 Annual Report Notes to the Consolidated
Financial Statements
For the year ended 30 June 2020
1. General Information
This section sets out the Group’s accounting policies that relate to the consolidated financial statements as a whole.
They have been presented in a structure which is intended to make them more relevant to shareholders. Where an accounting
policy is specific to one note, the policy is described in the note to which it relates.
Sky Network Television Limited (Sky) is a company incorporated and domiciled in New Zealand. The address of its registered office
is 10 Panorama Road, Mt Wellington, Auckland, New Zealand. The consolidated financial statements for the year ended 30 June
2020 comprise Sky Network Television Limited and its subsidiaries (the Group).
Sky is a company registered under the Companies Act 1993 and is a reporting entity under Part 7 of the Financial Markets Conduct
Act 2013. The consolidated financial statements of the Group have been prepared in accordance with the requirements of the
Financial Markets Conduct Act 2013 and the NZX Main Board Listing Rules.
The Group’s primary activity is to operate as a provider of sport and entertainment media services in New Zealand and overseas.
These consolidated financial statements were authorised for issue by the Board on 9 September 2020.
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with Generally Accepted Accounting
Practice in New Zealand (NZ GAAP). The Group is a for-profit entity for the purpose of complying with NZ GAAP. The consolidated
financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), other
New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The consolidated
financial statements also comply with International Financial Reporting Standards (IFRS).
These consolidated financial statements are prepared on the basis of historical cost except where otherwise identified.
The consolidated financial statements are presented in New Zealand dollars.
Group structure
The Group has a majority share in the following subsidiaries:
Name of Entity
Principal Activity
Country of
Incorporation
Parent
Sky DMX Music Limited
Commercial Music
New Zealand
Sky
Sky Ventures Limited
Investment
New Zealand
Sky
Media Finance Limited
Non-trading
New Zealand
Sky
Outside Broadcasting Limited
Broadcasting services
New Zealand
Sky
Screen Enterprises Limited
Non-trading
New Zealand
Sky
Igloo Limited
Non-trading
New Zealand
Sky
Believe It Or Not Limited
Entertainment quizzes New Zealand
Sky
Sky Investment Holdings Limited
(incorporated 15 August 2019)
RugbyPass Limited
(acquired 19 August 2019)
RugbyPass Asia Pte Ltd
(acquired 19 August 2019)
Lightbox New Zealand Limited
(acquired 31 January 2020)
Investment
New Zealand
Sky
Streaming services
Ireland
Sky Investment
Holdings Limited
Management services
Singapore
RugbyPass Limited
Streaming services
New Zealand
Sky
Interest held
Jun-20
Jun-19
50.50%
50.50%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
51.00%
51.00%
100.00%
100.00%
100.00%
100.00%
_
_
_
_
46
2. Basis of Consolidation
The Group financial statements consolidate the financial statements of Sky and its subsidiaries. The acquisition method of
accounting is used to account for the acquisition of subsidiaries and businesses by the Group. The consideration transferred in
a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair value of the assets
transferred and the liabilities incurred. Each identifiable asset and liability is generally measured at its acquisition date fair value
except if another NZ IFRS requires another measurement basis. The excess of the consideration of the acquisition and the amount
of any non-controlling interest in the acquired company, less the Group's share of the net of the acquisition date amounts of the
identifiable assets acquired and the liabilities assumed, is recognised as goodwill. Acquisition related costs are expensed as incurred.
Subsidiaries
Subsidiaries are entities that are controlled, either directly or indirectly, by the Group. The Group controls an entity when it is
exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to affect those returns from
its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date on which control ceases.
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as are unrealised
gains unless the transaction provides evidence of an impairment of the asset transferred.
Transactions with non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is,
as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and
the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals
to non-controlling interests are also recorded in equity.
3. Significant Accounting Policies and
Key Sources of Estimation Uncertainty
Growth strategy and future performance
In the 31 December 2019 interim financial statements, the Group reported that it has continued to execute its strategy which
included:
• The acquisition of RugbyPass Limited in August (refer note 27).
• Negotiating a five-year partnership agreement with the New Zealand Rugby Union (NZR) as a result of successfully renewing
the SANZAAR contract for the five years from 2021 to 2025 (refer note 15), including the issuance of 21,801,325 Sky shares to
NZR with a fair value of $15 million (refer note 9).
• Changing the organisational design and structure within the Group (refer note 5), and
• Completing the acquisition of Lightbox from Spark in January 2020 (refer note 27).
COVID-19
On 11 March 2020 the World Health Organisation declared a global pandemic as a result of the outbreak and spread of COVID-19.
Following this, on 25 March 2020 the New Zealand Government raised its Alert Level to 4 (nationwide lockdown of non-essential
services) for an initial four-week period. Restrictions on movement, travel and gatherings resulted in the significant reduction of
live sports, and increased uncertainty around the future scheduling of sporting events and flow of content, both in New Zealand
and internationally. Sky’s operations were considered to be an essential service and were able to operate during Alert Level 4.
The lockdown resulted in increased demand for entertainment content as people stayed at home and as a result Neon and
Lightbox recorded strong growth.
The Group took several immediate steps to support customer retention and to manage liquidity including:
• Proactively reducing charges to commercial customers and allowing them to suspend their accounts while they were unable
to operate.
• Offering entertainment and movie package upgrades to sports subscribers to reward loyalty, mitigate downgrades and churn.
• Undertaking cost saving measures in relation to operating expenditure, particularly in relation to programming operations
due to a reduction in sports related production.
• Deferring non-essential capital projects.
• Accelerated the raising of additional capital.
47
Sky / 2020 Annual Report 3. Significant Accounting Policies and Key Sources
of Estimation Uncertainty (Continued)
As discussed above, the Group was in the process of implementing its growth strategy and ensuring the appropriate funding
structure was in place to support the strategy. The Group completed a capital raise on 21 May 2020 to raise $157 million of
additional capital to strengthen Sky’s balance sheet and reposition for its refreshed strategy and help mitigate the impacts
of COVID-19. The capital raise and renegotiation of bank facility terms (refer note 16) enabled the Group to repay debt and
have access to sufficient capital to repay the bonds in March 2021, withstand near term headwinds and to execute on future
growth opportunities based on the Board approved forecasts. Based on the additional capital secured, including consideration
of an earlier return to sport than forecast, the Board considers that compliance with financial covenants will continue to be
met for at least the next 12 months from approving these consolidated financial statements (refer note 16).
The ongoing uncertainties discussed and other economic effects of the pandemic have been considered in the Group’s key
estimates and judgements as disclosed in the following notes:
• Intangible assets - the ability to achieve future forecasts and the consequential impacts on the carrying value of goodwill and
other finite life intangibles (refer notes 14 and 15).
• Receivables - the ability of its subscribers and commercial customers to pay (refer note 8).
• Programming rights - the ability to monetise prepaid and future sports programming rights (refer note 9).
• Identification of cash generating units (CGUs) and allocation of goodwill to CGUs - the Board reassessed their view of the
Group's CGUs and believe that Sky and RugbyPass are separate individual CGUs which require judgement (refer note 15).
Considering the above, the Board has reviewed the operating and cash flow forecasts for the five-year period to 2025. The Board
is satisfied based on their review of these financial forecasts that during the period to at least 12 months from the approving of
the consolidated financial statements there will be adequate cash flows generated from operating and financing activities to meet
the obligations of the Group.
Accounting policies
The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by
the Group in its consolidated financial statements as at and for the year ended 30 June 2019, except for the adoption of new
standards effective as of 1 July 2019 (detailed below). The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
The Group has applied NZ IFRS 16 Leases for the first time for the year ended 30 June 2020, using a modified retrospective approach
which does not require restatement of previous financial statements. The nature and effect of these changes are disclosed below.
NZ IFRS 16 - Impact on the financial statements
NZ IFRS 16 primarily changes lease accounting for lessees; lease agreements now give rise to the recognition of an asset
representing the right to use the leased item and a loan obligation for future lease payables. Lease costs are recognised in the
form of depreciation of the right-of-use asset and interest is recognised on the lease liability. The new standard has substantively
changed the accounting treatment for operating leases where rental charges were previously recognised on a straight-line basis
and no lease asset or lease obligation was recognised. The standard was effective for accounting periods beginning on or after
1 January 2019 and the Group adopted the standard from 1 July 2019.
In applying NZ IFRS 16 for the first time the Group has used the following practical expedients permitted by the standard:
• Use of a single discount rate to leases with reasonably similar characteristics.
• Use of hindsight in determining a lease term.
• Exclusion of initial direct costs for the measurement of the lease asset at the date of initial recognition.
• Exclusion of leases with a remaining term of less than 12 months.
Lease liabilities are measured at the present value of the remaining lease payments using the Group’s incremental borrowing rate (IBR)
as at 1 July 2019 as described in note 17. The associated right-of-use assets were measured on a retrospective basis as if the new rules
had always been applied. Right-of-use assets are classified as transmission, property, equipment and motor vehicles. Finance leases at
30 June 2019 were transferred to lease liabilities and right-of-use assets on 1 July 2019.
48
Notes to the Consolidated Financial Statements (Continued) The impact of adoption of NZ IFRS 16 on the Group’s consolidated financial statements is summarised in the table below:
In NZD 000
Right-of-use assets
Lease liabilities
Deferred tax
Retained earnings
Note
13
17
30-Jun-20
96,821
(109,865)
3,652
10,785
1-Jul-19
77,962
(92,944)
4,194
10,785
Lease payments are discounted using the interest rate implicit in the lease. If the rate cannot be readily determined, which is
the case for most of the Group’s leases, the Group’s incremental borrowing rate (IBR) is used. The IBR is the rate that the Group
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions. To determine the IBR, the Group calculates its internal borrowing rate on a
quarterly basis. The weighted average IBR at 30 June 2020 was 4.37% (1 July 2019: 4.00%).
The table below reconciles commitments disclosed as at 30 June 2019 to the lease liability balance at 1 July 2019:
Commitments disclosed as at 30 June 2019
Operating leases
Contracts for transmission service
Other service commitments (note 29)
Less short term and immaterial leases recognised on a straight-line basis as an expense
Less contracts assessed as service commitments
Adjustment for transponder accrual
Discounting using the Group's incremental borrowing rate at the date of initial application
Operating lease liability
Current lease liabilities
Non-current lease liabilities
92,660
7,038
26,511
126,209
(2,354)
(22,813)
(3,070)
(5,028)
92,944
36,873
56,071
92,944
The adoption of NZ IFRS 16 does not have any significant impact on the Group’s banking covenants since transmission leases were
already treated as finance leases in the covenant calculations.
Foreign currency translation
Functional and presentation currency
The Group’s consolidated financial statements are presented in New Zealand dollars (NZD) which is the Group’s functional and
presentation currency.
Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange
rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are
translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that
are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in profit or loss and presented within finance costs, except when deferred
in other comprehensive income as qualifying cash flow hedges.
49
Sky / 2020 Annual Report 3. Significant Accounting Policies and Key Sources
of Estimation Uncertainty (Continued)
Foreign operations
The income statements of foreign operations are translated into the Group’s reporting currency at average exchange rates for
the period and the assets and liabilities of foreign operations are translated into NZD at the exchange rates prevailing at the
reporting date. The income and expenses of foreign operations are translated into NZD at the exchange rates at the dates of
the transactions.
Foreign exchange differences are recognised in other comprehensive income and accumulated in the translation reserve.
Goods and services tax (GST)
The consolidated statement of comprehensive income and statement of cash flows have been prepared so that all components
are stated exclusive of GST. All items in the consolidated balance sheet are stated net of GST with the exception of receivables
and payables, which include GST invoiced.
4. Segment and Revenue Information
In NZD 000
Residential satellite subscriptions
Other subscriptions
Advertising
Other revenue
Other income
30-Jun-20
30-Jun-19
581,962
105,381
45,155
14,143
1,005
747,646
629,763
98,595
51,805
14,963
-
795,126
Description of revenue streams
Within its operating business segment Sky has several revenue streams which it reports against. These include:
Residential satellite revenue: This includes revenue from Sky’s subscription services linked to its satellite customers.
Customers are invoiced on a monthly basis and contracts are normally for a period of 6 or 12 months with monthly
renewals thereafter. Early termination fees apply. Revenue is recognised over the period to which the subscription related.
Unearned subscriptions and deferred revenues are revenues that have been invoiced relating to services not yet performed
and are reported as contract liabilities (refer note 10).
Other subscription revenue: This includes commercial revenue earned from Sky subscriptions at businesses throughout
New Zealand, revenue from content sold to third parties for retransmission and revenue from streaming services such as
Neon, Sky Sport Now, RugbyPass and Lightbox. This revenue is recognised over time based on the timing of the services
provided. Contracts vary in length, including daily, weekly, monthly and are payable in advance.
Contracts with wholesale customers, where some of the Group’s services, (including Neon, Lightbox and Sky Sport Now) are
combined with the customer’s products and sold as part of a bundled service have differing provisions such that the Group
has been determined to be either the principal or the agent depending on the wholesale contract terms. Revenue from these
contracts is invoiced monthly depending on the services provided, and is reported on a gross basis with the commission paid
or discount offered being treated as an operating expense where the Group is determined to be the principal and on a net
basis where the Group is determined to be the agent.
Advertising revenue: This relates to revenue received from customers in return for advertising placed on the Group’s services.
This revenue is reported when the advertisement is screened. Contract terms and rates vary depending on the customer and
services provided. Customers are billed monthly in arrears. Revenue is earned at a point in time.
Other revenue: This includes revenue from installation services, transmission services and various other non-subscriber
related revenue. This revenue is recorded when the product or service has been delivered to the customer at a point in time.
50
Notes to the Consolidated Financial Statements (Continued) Key estimates and judgements
Gross versus net presentation
If the Group has control of goods or services when they are delivered to a customer, then the Group is the principal in the sale
to the customer, otherwise the Group is acting as an agent. Whether the Group is considered to be the principal or an agent
in the transaction depends on analysis by management of both the legal form and substance of the agreement between the
Group and its business partners; such judgements impact the amount of reported revenue and operating flows. Scenarios
requiring judgement to determine whether the Group is a principal or an agent include, for example, those where the Group
contracts through a third party to deliver its services such as Neon, Sky Sport Now, RugbyPass and Lightbox to customers via
a bundled service offering.
Operating segments are reported in a manner consistent with the internal reporting provided to Sky's executive team who are
the chief operating decision-makers. Sky's executive team is responsible for allocating resources and assessing performance of
the operating segments. Sky operates in a single operating segment; the provision of sport and entertainment media services in New
Zealand. RugbyPass has been identified as a separate operating segment and will form a separate cash generating unit for the year
ended 30 June 2020. For financial reporting purposes and with reference to the aggregation criteria in the accounting standards
RugbyPass will be aggregated with the Sky business operating segment for the purposes of reporting segment disclosure.
The table below shows the disaggregation of the Group’s revenue from contracts with customers on the basis of when revenue
is recognised for its principal revenue streams as described below.
Residential
satellite
subscriptions
Other
subscriptions
Advertising
Other
revenue
Total revenue
from contracts
with customers
In NZD 000
For the year ended 30 June 2020
Revenue from customers
Inter-segment revenue
Total revenue
Timing of revenue recognition
At a point in time
Over time
For the year ended 30 June 2019
Revenue from customers
Inter-segment revenue
Total revenue
Timing of revenue recognition
At a point in time
Over time
581,962
105,381
-
-
45,155
-
581,962
105,381
45,155
10,822
571,140
581,962
105,381
105,381
-
45,155
629,763
-
98,595
-
629,763
98,595
51,805
13,895
615,868
629,763
-
51,805
98,595
98,595
-
51,805
-
45,155
51,805
-
Inter-segment revenue relates to intergroup production services.
28,000
(13,857)
14,143
7,563
7,585
15,148
32,847
(17,884)
14,963
7,505
7,458
14,963
760,498
(13,857)
746,641
63,540
684,106
747,646
813,010
(17,884)
795,126
73,205
721,921
795,126
51
Sky / 2020 Annual Report 5. Operating Expenses
Loss before tax includes the following separate expenses/(credits):
In NZD 000
Notes
30-Jun-20
30-Jun-19
12
14
13
15
8
Depreciation, amortisation and impairment
Depreciation and impairment of property, plant and equipment (1)
Amortisation of intangibles
Depreciation of right-of-use assets
Impairment of goodwill
Total depreciation, amortisation and impairment
Credit loss
Movement in provision
Net write-off
Total credit loss
Fees paid to external auditors
Audit fees paid to principal auditors (2)
Regulatory reporting
Non-assurance services by principal auditors
Agreed upon procedures on the bank compliance certificate
Treasury related financial markets risk analysis and commentary
Scenario analysis of property requirements
Total fees to external auditors
Employee costs (3)
Kiwisaver employer contributions
Donations
Operating lease and rental expenses (4)
54,698
31,050
33,570
177,500
296,818
319
1,033
1,352
649
3
3
35
36
726
105,707
2,304
302
916
109,100
22,003
-
670,000
801,103
(57)
1,243
1,186
369
2
3
28
402
92,483
2,193
214
35,872
(1) The majority of depreciation and amortisation relates to broadcasting assets (refer note 12).
(2) The audit fee includes the fee for both the annual audit of the financial statements and the review of the interim financial statements.
(3) Redundancy costs of $15.5 million (30 June 2019: $2.2 million) and a Holidays Act 2003 compliance provision of $3.2 million (note 26) and share
based payments of $386,000 (note 28) are included within employee costs.
(4) The balance includes short term and immaterial operating leases which have been excluded from the new accounting treatment for leases, which
under NZ IFRS 16 have been capitalised as lease liabilities and right-of-use assets (refer notes 13 and 17).
Employee entitlements to salaries, wages and annual leave, to be settled within 12 months of the reporting date represent
present obligations resulting from employees' services provided up to the reporting date calculated at undiscounted
amounts based on remuneration rates that the Group expects to pay.
Incentive plans are recognised as a liability and an expense for discretionary short term incentives (STIs) based on a formula
that takes into account the economic value added by employees during the reporting period. The Group recognises this
provision where contractually obliged or where there is a past practice that has created a constructive obligation.
52
Notes to the Consolidated Financial Statements (Continued)
6. Earnings Per Share
Basic and diluted loss per share
Loss after tax attributable to equity holders of the
parent (NZD 000)
Weighted average number of ordinary shares on issue
(thousands)
Basic and diluted earnings/(loss) per share(cents)
30-Jun-20
30-Jun-19
(restated)
30-Jun-19
(156,979)
(608,158)
(608,158)
656,639
(23.91)
506,842
(119.99)
389,140
(156.28)
30-Jun-20
30-Jun-19
30-Jun-19
Issued ordinary shares at the beginning of the year
389,139,785
389,139,785
389,139,785
Ordinary shares issued on 19 August 2019
Ordinary shares issued on 1 November 2019
Ordinary shares issued on 21 February 2020
Ordinary shares issued on 2 June 2020
Ordinary shares issued on 16 June 2020
Total number of shares on issue
25,085,408
21,801,325
200,000
998,629,091
311,423,949
-
-
-
-
-
-
-
-
-
-
1,746,279,558
389,139,785
389,139,785
Weighted average number of ordinary shares on issue
656,638,762
506,842,173
389,139,785
The prior year loss per share has been restated to adjust for the impact of the rights issue completed in June 2020 (refer note 19).
Basic loss per share
Basic earnings or loss per share is calculated by dividing the profit attributable to equity holders of Sky by the weighted average
number of ordinary shares on issue during the year.
Diluted earnings per share
Diluted earnings or loss per share is calculated by adjusting the weighted average of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. Sky had no dilutive potential ordinary shares during the current or prior period.
7. Taxation
Income tax expense
The total charge for the year can be reconciled to the accounting profit/(loss) as follows:
In NZD 000
Loss before tax
Prima facie tax expense at 28%
Non deductible expenses
Prior year adjustment
Adjustment for change to building depreciation
Tax loss not recognised
Other
Effect of foreign tax rates
Income tax expense
Allocated between
Current tax payable
Deferred tax
Income tax expense
30-Jun-20
30-Jun-19
(146,306)
(40,966)
49,806
9
(2,487)
1,813
2
2,289
10,466
27,656
(17,190)
10,466
(583,377)
(163,346)
187,812
(8)
-
-
2
-
24,460
42,344
(17,884)
24,460
53
Sky / 2020 Annual Report
7. Taxation (Continued)
Buildings are currently not depreciable for tax purposes. As a result of a change in tax legislation enacted on 25 March 2020
with effect from 1 July 2020, (being the beginning of the 2020/2021 income year), the ability to tax depreciate buildings has
been reinstated. The change requires the restatement of the tax base (representing the future benefit of available tax deductions)
in the current 2019/2020 income year. This has resulted in a decrease to the deferred tax liability of $2,486,958.
Current income tax expense
Income tax expense represents the sum of the tax currently payable and deferred tax, except to the extent that it relates
to items recognised directly in other comprehensive income, in which case the tax expense is also recognised in other
comprehensive income. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using the rates
that have been enacted or substantively enacted by the balance date.
Imputation credits
In NZD 000
Imputation credits available for subsequent
reporting periods based on a tax rate of 28%
30-Jun-20
30-Jun-19
145,963
119,646
The above amounts represent the balance of the imputation credit account as at the end of the reporting period adjusted for:
• Imputation credits that will arise from the payment of the amount of the provision for income tax;
• Imputation debits that will arise from the payment of dividends. Availability of these credits is subject to continuity of ownership
requirements.
Deferred tax (assets) and liabilities
The following are the major deferred tax liabilities and assets and the movements thereon during the current and prior reporting periods.
In NZD 000
For the year ended 30 June 2020
At 1 July 2019
Acquired on acquisition of subsidiaries
NZ IFRS 9 hedging adjustment recognised
through other comprehensive income
Reinstatement of building depreciation
Leased assets under NZ IFRS 16
- retained earnings impact on transition
(Credited)/charged to profit and loss
Balance at 30 June 2020
For the year ended 30 June 2019
At 1 July 2018
NZ IFRS 9 hedging adjustment recognised
through other comprehensive income
Revaluation of available for sale investment
recognised through other comprehensive income
(Credited)/charged to profit and loss
Balance at 30 June 2019
Notes
Fixed
assets
Leased
assets
Other
Recognised
directly
in equity
Total
18,924
1,923
321
(2,487)
27
20
3
20
15,983
(5,271)
8,178
1,923
-
(2,487)
-
-
-
34
-
321
-
-
-
-
-
-
(4,194)
(5,715)
(4,911)
(4,077)
-
(4,194)
(14,703)
1,899
6,878
(9,348)
355
(216)
17,543
22,364
(3,133)
4,052
40,826
-
-
-
-
-
-
(9,365)
(6,381)
(2,138)
8,178
15,983
(5,271)
(3,597)
(3,597)
(421)
(421)
-
34
(17,884)
18,924
Certain deferred tax assets and liabilities have been offset as allowed under NZ IAS 12 where there is a legally enforceable right
to set off current tax assets against current tax liabilities and where the deferred tax assets and liabilities are levied by the same
taxation authority.
54
Notes to the Consolidated Financial Statements (Continued)
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination,
that at the time of the transaction neither affects accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates that have been enacted or substantively enacted by the balance date and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are
recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Key estimates and judgements
Deferred tax assets are recognised for unused tax losses and other deductible temporary differences to the extent that it
is probable that taxable profit will be available against which the losses and other deductible temporary differences can
be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be
recognised based upon the likely timing and level of future taxable profits. No deferred tax asset has been recognised in
relation to the RugbyPass accumulated losses of $14,506,000 and Igloo Limited’s accumulated losses of $12,150,000
(30 June 2019: $12,150,000). Those tax losses can be carried forward for use against future taxable profits of both entities
subject to meeting the requirements of the income tax legislation in the local tax jurisdiction including shareholder continuity.
8. Trade and Other Receivables
In NZD 000
Trade receivables
Less provision for loss allowance
Trade receivables - net
Other receivables
Prepaid expenses
Balance at end of year
Deduct prepaid expenses
Financial instruments
Impairment of trade receivables
Notes
30-Jun-20
30-Jun-19
40,193
(898)
39,295
6,019
11,540
56,854
(11,540)
45,314
51,405
(579)
50,826
2,308
8,862
61,996
(8,862)
53,134
25
The Group applies the NZ IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
To measure the expected credit losses trade receivables have been grouped based on the shared credit risk characteristics
and the days past due. The expected loss rates are based on the payment profiles of revenue over a period of 24 months before
30 June 2020 and 1 July 2019 respectively and the corresponding historical credit losses experienced within this period. As a result
of the COVID-19 pandemic the Group has increased its expected loss rates due to the uncertain future outlook for its residential
and commercial satellite customers. The ability of these customers to settle receivables in the near future is not currently
considered to relate to the historical credit risk characteristics of those customers.
The impairment of trade receivables as at 30 June 2020 is as follows:
In NZD 000
Residential subscribers
Commercial subscribers
Wholesale customers
Advertising
Other
30-Jun-20
30-Jun-19
Gross
Impairment
Gross
Impairment
24,383
2,975
7,900
2,894
2,041
40,193
(653)
(58)
-
(32)
(155)
(898)
31,622
5,197
8,040
5,132
1,414
(423)
(17)
-
(42)
(97)
51,405
(579)
55
Sky / 2020 Annual Report 8. Trade and Other Receivables (Continued)
As at 30 June, the ageing analysis of trade receivables is as follows:
30-Jun-20
Expected
loss rate
0.2%
2.2%
6.4%
53.7%
85.4%
In NZD 000
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Greater than 90 days
Gross
carrying
amount
34,735
3,566
937
406
549
40,193
Loss
allowance
In NZD 000
71 Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Greater than 90 days
80
60
218
469
898
30-Jun-19
Expected
loss rate
0.2%
2.3%
6.9%
39.1%
43.6%
Gross
carrying
amount
44,527
5,177
944
399
358
51,405
Loss
allowance
84
118
65
156
156
579
Movements in the provision for impairment of receivables were as follows:
In NZD 000
Opening balance
Charged during the year
Utilised during the year
Closing balance
Note
30-Jun-20
30-Jun-19
5
579
1,352
(1,033)
898
636
1,186
(1,243)
579
The provision charged and the amount utilised for impaired receivables has been included in subscriber related costs in profit or loss.
Amounts charged to the allowance account are generally written off when there is no expectation of receiving additional cash, usually
ninety days after a customer has been disconnected. The maximum exposure to credit risk at the reporting date is the fair value of
each class of receivable. The Group holds collateral of $1.2 million (30 June 2019: $1.3 million) in the form of deposits for satellite
commercial customers.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. Collectability of trade receivables is reviewed on an on-going basis.
Debts which are known to be uncollectible are written off. An impairment loss is recognised based on expected credit losses
for each trade receivable group.
56
Notes to the Consolidated Financial Statements (Continued) 9. Programme Rights Inventory
In NZD 000
Opening balance
Acquired as part of acquisition of RugbyPass and Lightbox (note 27)
Settled by issue of shares to NZ Rugby Union (Note 19)
Acquired during the year
Written off during the year
Charged to programming expenses
Balance at end of year
30-Jun-20
89,458
9,517
15,436
280,247
(3,240)
(277,596)
113,822
30-Jun-19
78,378
-
-
275,789
(5,715)
(258,994)
89,458
Programme rights inventories for broadcast are stated at the lower of cost and net realisable value (‘NRV’), and net of the
accumulated expense charged to the income statement to date. Such programming rights are included as inventories when
the legally enforceable licence period commences and all of the following conditions have been met: (a) the cost of each
programme is known or reasonably determinable; (b) the programme material has been accepted by the Group in accordance
with the conditions of the rights; and (c) the programme is available for its first showing.
Prior to being included in inventories, the programming rights are classified as television programme rights not yet available
for transmission and not recorded as inventories on the Group’s balance sheet and are instead disclosed as contractual
commitments (see note 29).
The cost of television programme inventories is recognised as programming rights in the income statement, over the period
the Group utilises and consumes the programming rights, applying linear-broadcast and time-based methods of amortisation
depending on the type of programme right, taking into account the circumstances primarily as described below.
These circumstances may change or evolve over time and, as such, the Group regularly reviews and updates the method used
to recognise programming expense.
• Sports – the majority or all of the cost is recognised in the income statement on the first broadcast or, where the rights are
for multiple seasons or competitions, such rights are recognised principally on a straight-line basis across the contracted
broadcast period or season.
• Movies – the cost is recognised in the income statement on an “as played” basis over the period for which the broadcast
rights are licensed.
• Pass through channels – the cost is amortised in the month of activity.
• Entertainment streaming content is amortised on a straight-line basis over the licence period.
The Group regularly reviews its programming rights for impairment. Where programme broadcast rights are surplus to
the Group’s requirements, and no gain is anticipated through a disposal of the rights, or where the programming will not
be broadcast for any other reason, a write-down to the income statement is made. Any reversals of inventory write-downs
are recognised as reductions in operating expense.
Key estimates and judgements
The COVID-19 pandemic has resulted in uncertainty around the valuation and amortisation of sports rights specifically in
relation to the value of major sports competitions. Some competitions have been delayed or postponed. As at 30 June 2020 it
is not clear when and if certain sports events will take place, and as a consequence, management have exercised judgement in
assessing the value of programming rights at year end and the estimated amortisation of rights costs. Where the Group has
negotiated an equitable reduction due to COVID-19 prior to balance date on contracted payments for certain sports rights
where content has been prepaid but not delivered or where content has been contracted for but will not be delivered, the
amortisation expense has been adjusted accordingly.
57
Sky / 2020 Annual Report 10. Trade and Other Payables and Contract Liabilities
In NZD 000
Trade payables
Deferred consideration
Employee entitlements
Tax payables
Accruals
Provisions
Balance at end of year
Less
Payables not classified as financial instruments
Financial instruments
Notes
30-Jun-20
30-Jun-19
27
26
25
94,009
10,522
7,307
13,750
41,159
9,274
79,000
-
13,575
8,885
34,618
-
176,021
136,078
(30,331)
145,690
(22,460)
113,618
Trade payables have increased due to accruals for sports rights payments where delivery of rights has been either postponed
or delayed.
Tax payables, provisions and employee benefits do not meet the definition of a financial instrument and have been excluded from
the “Trade and other payables” category.
Trade and other payables, other than contingent consideration which is measured at fair value, are initially measured at fair
value and are subsequently measured at amortised cost, using the effective interest method.
Contract liabilities
In NZD 000
Deferred revenue
30-Jun-20
51,180
30-Jun-19
54,396
The opening balance of contract liabilities at 1 July 2018 was $60,746,000. Contract liabilities of $54,396,000 were expensed during
the year ending 30 June 2020.
Contract liabilities are not classified as financial instruments.
Contract liabilities are recognised for payments received from customers in advance and are recognised into revenue over
the service period. Sky invoices customers in advance for both residential and commercial subscriptions. Contract liabilities
recognised at the end of the financial year are recognised as revenue in the following year.
11. Assets Held for Sale
On 11 February 2020, the Board made the decision to dispose of the assets of Outside Broadcasting Limited (OSB) a subsidiary
of Sky. The sale of the assets of OSB is expected to be completed within a year from the reporting date. As at 30 June 2020 the
assets have been classified as held for sale in the financial statements. Assets and liabilities held for sale have been reported at
their book values. OSB is part of the Sky operating segment. The sale of OSB was announced on 12 August 2020 (refer note 31).
In NZD 000
Assets
Property, plant and equipment (net)
Right-of-use assets (net)
Assets held for sale
Liabilities
Employee entitlements
Short term lease liabilities
Long term lease liabilities
Liabilities associated with assets held for sale
58
Note
30-Jun-20
12
13
17
17
7,245
1,122
8,367
235
349
1,017
1,601
Notes to the Consolidated Financial Statements (Continued) 12. Property, Plant and Equipment
In NZD 000
For the year ending 30 June 2020
Cost
Balance at 1 July 2019
Acquired as part of the
acquisition of RugbyPass and
Lightbox
Transfer between categories
Transfer from projects
Assets held for sale (note 11)
Additions
Disposals
Balance at 30 June 2020
Accumulated depreciation
Balance at 1 July 2019
Depreciation for the year
Disposals
Balance at 30 June 2020
Net book value at
30 June 2020
For the year ending 30 June 2019
Cost
Transfer to software assets
Additions
Disposals
Balance at 30 June 2019
Accumulated depreciation
Balance at 1 July 2018
Depreciation for the year
Impairment
Disposals
Land, buildings
& leasehold
improvements
Broadcasting
& studio
equipment
Decoders &
associated
equipment
Capitalised
installation
costs
Other
plant &
equipment
Projects
under
development
Total
70,011
144,811
321,242
261,914
89,091
42,866
929,935
-
(2,408)
937
(196)
2,419
-
-
(78)
1,676
(48,942)
3,681
-
-
-
-
-
-
-
-
385
2,486
4,663
(6,485)
-
-
385
-
(9,440)
(2,164)
(52)
(55,675)
681
12,597
5,654
2,438
27,470
(503)
(17,840)
(22,590)
(3,252)
-
(44,185)
70,763
100,645
304,083
251,921
92,542
35,812
855,766
26,267
136,325
298,351
209,012
63,337
33,426
766,718
Assets held for sale (note 11)
(125)
(42,414)
-
-
(5,891)
2,380
6,460
15,586
23,471
6,801
-
-
-
54,698
(48,430)
(41,805)
-
(503)
(17,830)
(22,590)
(882)
28,522
99,868
296,107
209,893
63,365
33,426
731,181
42,241
777
7,976
42,028
29,177
2,386
124,585
Balance at 1 July 2018
64,582
139,293
331,720
287,210
77,062
23,295
923,162
Transfer between categories
3,364
1,737
-
2,951
(886)
-
-
-
-
-
6,739
(11,840)
-
-
(3,127)
(3,127)
4,153
3,229
15,566
5,476
34,538
65,913
(372)
(13,707)
(40,862)
(186)
-
(56,013)
70,011
144,811
321,242
261,914
89,091
42,866
929,935
24,753
129,828
280,099
222,512
56,388
2,400
6,869
27,165
27,362
7,135
-
-
713,580
70,931
-
(886)
-
4,743
-
-
33,426
38,169
(372)
(13,656)
(40,862)
(186)
-
(55,962)
Balance at 30 June 2019
26,267
136,325
298,351
209,012
63,337
33,426
766,718
Net book value
at 30 June 2019
43,744
8,486
22,891
52,902
25,754
9,440
163,217
59
Sky / 2020 Annual Report
12. Property, Plant and Equipment (Continued)
Land, buildings and leasehold improvements at 30 June 2020 includes land with a cost of $8,820,000 (30 June 2019: $8,820,000).
Depreciation related to broadcasting assets (including decoders and capitalised installation costs) of $45,527,000 (30 June 2019:
$61,391,000) accounts for the majority of the total depreciation charge. Due to immateriality of the remaining depreciation, no
allocation of depreciation has been made across expense categories in the consolidated statement of comprehensive income.
In the prior year, an impairment charge of $38,169,000 was incurred in relation to the closure of infinite video platform project
(IVP) and impairment of decoders and associated equipment.
In compliance with NZ IFRS 16 ‘Leases’, assets relating to finance leases with a value of $2,387,000 were transferred to
right-of-use assets on 1 July 2019. (Refer note 13).
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses except land which
is shown at cost less impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.
Capitalised installation costs are represented by the cost of satellite dishes, installation costs and direct labour costs. Where
parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of
property, plant and equipment.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item
can be measured reliably. The cost of additions to plant and other assets constructed by the Group consist of all appropriate
costs of development, construction and installation, comprising material, labour, direct overhead and transport costs. For
qualifying assets directly attributable interest costs incurred during the period required to complete and prepare the asset
for its intended use are capitalised as part of the total cost. All other costs are recognised in profit or loss as an expense is
incurred. Additions in the current year include $2,064,000 of capitalised labour costs (30 June 2019: $746,000) and $205,000
of capitalised interest (30 June 2019: $997,000).
Projects under development comprise expenditure on partially completed assets. The projects include items of property, plant
and equipment and intangible assets. At completion of the project the costs are allocated to the appropriate asset categories
and depreciation or amortisation commences.
Costs may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and recognised in other
costs in profit or loss.
Depreciation
Property, plant and equipment are depreciated using the straight-line method so as to allocate the costs of assets to their
residual values over their estimated useful lives as follows:
Leasehold improvements
Buildings
Broadcasting and studio equipment
Decoders and associated equipment
Other plant and equipment
Capitalised installation costs
5-50 years
50 years
5-10 years
4-5 years
3-10 years
5 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
Key estimates and judgements
The estimated life of technical assets such as decoders and other broadcasting assets is based on management's best
estimates. Changes in technology may result in the economic life of these assets being different from that estimated
previously. The Board and management regularly review economic life assumptions of these assets as part of management
reporting procedures.
60
Notes to the Consolidated Financial Statements (Continued)
13. Right-Of-Use Assets
In NZD 000
Right-of-use assets
Transition balance on 1 July 2019
Reclassify assets relating to finance
leases previously recognised
Held for sale (note 11)
Additions and lease modification
Terminations
Depreciation
Balance at 30 June 2020
Transmission
Property
Equipment
Motor vehicles
Total
61,898
7,602
8,038
424
77,962
-
-
42,875
-
(25,341)
79,432
-
(1,029)
5,628
(864)
(1,740)
9,597
2,387
-
3,504
-
(6,342)
7,587
-
(93)
21
-
(147)
205
2,387
(1,122)
52,028
(864)
(33,570)
96,821
In the previous year, the Group only recognised lease assets for those assets relating to finance leases under NZ IAS 17 Leases.
The assets were presented in property, plant and equipment.
The Group leases various premises, transmission equipment, motor vehicles and sundry equipment. Rental contracts vary
between one and five years with some office leases containing renewal options. The Group has incorporated renewal options
into the lease term where it is reasonably certain that the lease will be extended.
Right-of-use assets are measured at cost which includes the initial measurement of the lease liability, plus any lease payment
made before the commencement date, initial direct costs and restoration costs less any lease incentives received. Right-of-use
assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Due to COVID-19 some lessors have provided the Group with lease concessions, being by way of reduction or postponement
of monthly payments, for periods of up to three months. These concessions have not resulted in any changes in either the lease
asset or the lease liability (refer note 17). The value of lease concessions received is $309,000 for property leases and $440,000 for
equipment leases. These are recorded as a deduction from operating expenses.
61
Sky / 2020 Annual Report
14. Intangible Assets
In NZD 000
Notes
Software
Other
intangibles
Projects
under
development
Total
For the year ending 30 June 2020
Cost
Balance at 1 July 2019
Acquired as part of the acquisition of
RugbyPass and Lightbox
Transfer from projects under
development
Additions
Disposals
Balance at 30 June 2020
Accumulated amortisation
Balance at 1 July 2019
Amortisation for the year
Disposals
Balance at 30 June 2020
Net book value at 30 June 2020
For the year ending 30 June 2019
Cost
Balance at 1 July 2018
Transfer from projects under
development
Additions
Disposals
Balance at 30 June 2019
Accumulated amortisation
Balance at 1 July 2018
Amortisation for the year
Disposals
Balance at 30 June 2019
Net book value at 30 June 2019
27
12
12
151,889
7,995
2,164
19,697
(3)
1,083
7,974
-
-
-
-
-
-
9,291
-
152,972
15,969
2,164
28,988
(3)
181,742
9,057
9,291
200,090
101,424
29,330
(3)
130,751
50,991
1,063
1,720
2,783
6,274
-
-
-
-
9,291
138,883
1,083
3,127
10,035
(156)
151,889
79,573
21,990
(139)
101,424
50,465
-
-
-
1,083
1,050
13
-
1,063
20
-
-
-
-
-
-
-
-
-
-
102,487
31,050
(3)
133,534
66,556
139,966
3,127
10,035
(156)
152,972
80,623
22,003
(139)
102,487
50,485
Software development costs recognised as assets are amortised on a straight-line basis over their estimated useful lives
(generally three to five years).
Direct costs associated with the development of broadcasting and business software for internal use are capitalised where
it is probable that the asset will generate future economic benefits. Capitalised costs include external direct costs of materials
and services consumed and direct payroll-related costs for employees (including contractors) directly associated with the
project and interest costs incurred during the development stage of a project. Additions in the current year to software
include $9,432,000 of accumulated capitalised labour costs (30 June 2019: $4,014,000), $7,956,000 of which were incurred
in the current year (30 June 2019: $3,331,000) and $513,000 of capitalised interest (30 June 2019; $60,000).
Projects under development comprise expenditure on partially completed assets. The projects include items of property, plant
and equipment and intangible assets. At completion of the project the costs are allocated to the appropriate asset categories
and depreciation or amortisation commences.
Key estimates and judgements
Assets that are subject to amortisation and depreciation are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's
fair value less costs to sell and value-in-use.
62
Notes to the Consolidated Financial Statements (Continued)
15. Goodwill
In NZD 000
Opening balance
Acquisition of RugbyPass
Impairment
Closing balance
Notes
30-Jun-20
27
5
395,331
38,481
(177,500)
256,312
30-Jun-19
1,065,331
-
(670,000)
395,331
Assets that have an indefinite useful life are not subject to amortisation and are tested at each reporting date for
impairment and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Impairment tests are performed by assessing the recoverable amount of each individual asset or cash generating unit (CGU).
The recoverable amount is determined as the higher amount calculated under a value-in-use or a fair value less costs of
disposal calculation. Both methods utilise pre-tax future cash flows which are included in the Group’s five-year business plan.
Following the emergence of COVID-19 and in advance of raising capital, the Group revisited its five-year strategy including
overlaying the known impacts of COVID-19 and any delays in growth as a result. The final five-year business plan used for the
impairment testing was approved by the Board in May 2020. Given the heightened level of uncertainty at present, as detailed
in the key estimates and judgments outlined below, forecasting with confidence and high levels of accuracy is difficult and
actual results may differ significantly from the forecasts contained in the Board approved five-year business plan.
Goodwill represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets,
liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition and the fair value of the non-controlling
interest in the acquired subsidiary. In prior years the goodwill balance has been allocated to the Group’s single reportable
segment. The majority of goodwill arose as a result of the acquisition of Sky by Independent Newspapers Limited (INL) in
2005. Subsequent acquisitions have resulted in increases to goodwill. In August 2019, the Group acquired RugbyPass and
recognised goodwill of $38.5 million (refer note 27).
For the year ended 30 June 2020, RugbyPass is reported as a separate CGU, albeit it continues to be included as part of
the Group’s single reportable segment (refer note 4). This differs from the reporting as at 31 December 2019 where the
Group reported one CGU, combining Sky and RugbyPass cash flows. Since the December 2019 reporting date, the Board has
reassessed their view of the Group’s CGUs and now believe that the separation of Sky and RugbyPass into individual CGUs
represents the lowest level for which there are separately identifiable cash inflows largely independent of the cash inflows
from other assets. This reassessment was largely driven by COVID-19 and the uncertainty it caused in the global sporting
rights market. This uncertainty has led the Board to pivot the RugbyPass strategy away from content rights monetisation
through streaming to the monetisation of its audience reach and self-generated content through advertising, sponsorship
and lower priced subscriptions to view non-rights content. This means the forecast revenue model for RugbyPass now largely
differs from that of Sky’s which continues to primarily be subscriber-based content rights monetisation.
In separating out the RugbyPass CGU from Sky’s, all of the RugbyPass acquisition goodwill of $38.5 million was allocated to
the RugbyPass CGU as it is management’s view that in conjunction with the factors described above, the existing Sky business
has not received any material synergy benefits from the acquisition of RugbyPass to date.
In performing impairment testing, if the carrying values exceed the recoverable amounts of the CGU, then the goodwill
allocated to each of these units is considered to be impaired and an impairment expense is recognised in the income
statement. The recoverable amounts of both CGUs for the year ended 30 June 2020 have been determined based on fair value
less cost of disposal calculations using the discounted cash flow (DCF) model. Valuations for the year ended 30 June 2020
have been completed by an independent third-party valuer. This valuation methodology uses level three inputs in terms of the
fair value hierarchy in NZ IFRS 13.
The fair value less cost of disposal calculations include benefits of future changes to the cost structure as the Group leverages
new technologies and continues to refine its operating models. For RugbyPass, it also includes the impacts of the change in
strategy. Some of these changes would not be included if value-in-use calculations were used to determine the recoverable
amounts of the CGUs and therefore fair value less cost of disposal calculations lead to the highest recoverable amounts for
both CGUs.
Key estimates and judgements
The determination of CGUs and the allocation of goodwill to these CGUs required judgement by management and this has been
outlined above.
The forecasts used in impairment testing also require assumptions and judgements about the future, such as discount rates,
terminal growth rates, forecast revenues, and assumptions around programming rights, and other costs and capital expenditure
to which the impairment models are very sensitive, and which are inherently uncertain. Actual results may differ materially from
those forecast or implied. The forecasts are not, and should not be read as, a forecast of, or guidance as to, the future financial
performance and earnings of the Group.
63
Sky / 2020 Annual Report 15. Goodwill (Continued)
Cash flows over the forecast period (FY21 to FY25)
Forecast cash flows are prepared based on management’s current expectations, with consideration given to internal information
and relevant external industry data and analysis. The cash flow assumptions reflect the Group’s growth ambitions which are
included in the Board approved five-year plan.
In determining the cash flows for the five-year business plan, the Group considered forecasts under several scenarios given the
uncertainty arising from the COVID-19 pandemic before selecting the most likely scenario representing a partial return of live
sports through 2020, with a more fulsome sports calendar in 2021. The Board acknowledges that there continues to be ongoing
uncertainties surrounding:
• the quantum and timing of subscription revenues including expected acquisition and retention rates for streaming and satellite
customers
• timing of live sports across the various sporting codes and delivery of rights according to contract, or delivery of equivalent
content
• formalised agreement of cost reductions for sports rights which were not delivered due to COVID-19 in accordance with
contractual commitments
• expansion of content delivery by means other than satellite, specifically the launch of broadband services.
Key cash flow assumptions include the following:
Sky CGU
Residential satellite and streaming revenues have been forecast based on management’s current expectations of subscriber
numbers and average revenues per user (ARPU). In forming these expectations, management has referenced past acquisitions,
churn, and acquisition performance. As well as past experience, the forecasts factor in management intervention and planned
growth strategies, specifically in streaming following Sky’s acquisition and merger of the Lightbox platform with Neon and the
repositioning of Sky Sport Now to increase its appeal to customers.
Broadband revenues represent a new revenue stream for Sky following its anticipated launch date in the 2021 financial year and
are estimated based on management’s expectations of Sky’s market penetration with reference to relevant industry data and
Sky’s expected ARPU.
Programming expenses include both programming rights and programming costs. Programming rights expenses have been
forecast with reference to contractual arrangements for content currently in place and management’s expectations of future
renewal of content arrangements. Management assumes the continuity of rugby content supply as envisioned in the short form
agreements (NZR Agreements) entered into by Sky, SANZAAR and NZ Rugby in October 2019. The parties continue to negotiate
relevant updates to the NZR Agreements reflecting changes to rugby content and competitions as a result of restrictions arising
from COVID-19 or as mutually agreed by the contractual parties. Management has assumed that sufficient volume of quality
rugby content will be delivered for the length of the contracted period and that the applicable contracted payments will be paid.
Programming costs largely comprise of sports production costs and are forecast with reference to the latest sporting calendar
and management’s expectations of future events.
Broadcasting and infrastructure expenses are forecast with reference to historical trends with assumed cost savings as Sky
continues to refine its operational activities through a period of transformational change and right-sizes its cost base.
RugbyPass CGU
Future RugbyPass revenues and costs are estimated with reference to comparable content generation, subscription, and
marketing businesses leveraging RugbyPass’ existing industry and user relationships, audience reach and content engagement.
Capital expenditure within both CGUs is forecast with reference to revenue consistent with historical trends and the changing
nature of the Group’s asset base.
Discount rates and terminal growth rates
The terminal growth rates and discount rates used in the 30 June 2020 impairment assessment calculations (and the equivalent
assumptions for 30 June 2019) are detailed below. Costs of disposal are assumed to be 1% of enterprise value.
%
Terminal growth rate
Discount rate (post-tax)
Discount rate (pre-tax)
*Note that FY19 only had the Sky CGU
64
30-Jun-20
30-Jun-19
Sky CGU
1.4%
15.3%
21.3%
RugbyPass
CGU
2.0%
35.0%
48.6%
Sky CGU
0.0%
9.0%
12.5%
RugbyPass
CGU
-
-
-
Notes to the Consolidated Financial Statements (Continued) Management has assumed that a terminal growth rate of 1.4% (2019: 0%) more accurately reflects the long-term growth rate
to apply to cash flows beyond those explicitly modelled. The 1.4% rate takes into account the surety of content supply from
entering into long-term content supply agreements in the current financial year and the changing balance of future revenues with
streaming and other subscription revenue that are likely to more than offset the decline of residential satellite revenues. Any risks
of not achieving this long-term growth rate have been adequately factored into the discount rate.
The discount rates represent the current assessment of the risks specific to each CGU, taking into account the time value of money
and risks of achieving the cash flow estimates. The discount rate calculation is based on the specific circumstances of the CGUs
and is derived from its weighted average costs of capital (WACC).
The discount rates applied to the CGUs as at 30 June 2020 are materially higher than the prior year and interim reporting period
due to a number of factors driven in the most part by the impacts of COVID-19. The key impacts are summarised as follows:
• A higher risk weighting for RugbyPass given its recent change in strategy due to COVID-19 whereby the cash flows from the
higher certainty streaming business have been replaced with cash flows from the less advanced monetisation of its audience and
self-generated content business.
• Uncertainty of access to, and the nature of, content being delivered, especially sport content and future rugby content
• The delay of the launch of Sky Broadband to later than initially planned with launch now planned for later in FY21
• Uncertainty which exists within the overall economic environment and the impacts on Sky still being unknown
The increases in discount rates for the reasons described above are the key driver of impairment across both the CGUs.
Impairment of goodwill
In NZD 000
Opening balance
Acquisition of RugbyPass
Impairment
Closing balance
Notes
Sky CGU
27
5
395,331
-
(150,000)
245,331
RugbyPass
CGU
-
38,481
(27,500)
10,981
Based on the assumptions outlined above, an impairment of $177.5 million has been recognised. This impairment review
recognised that the difference between the Group's total market capitalisation and the carrying value of net assets had increased
beyond a level that could be supported. Following the current year impairment of goodwill, the recoverable amounts of both CGUs
now equal their carrying amounts.
Sky CGU
Using the fair value less cost of disposal approach, a recoverable amount for the Sky CGU of $349.7 million has been calculated. As
a result, an impairment to the goodwill balance of $150 million has been recognised as at 30 June 2020.
RugbyPass CGU
Using the fair value less cost of disposal approach, a recoverable amount for the RugbyPass CGU of $15.8 million has been
calculated. An impairment to the goodwill balance of $27.5 million has been recognised as at 30 June 2020.
65
Sky / 2020 Annual Report 15. Goodwill (Continued)
Sensitivities
The impact of new product offerings that are planned, proposed price changes and market changes arising from competition make
it difficult to estimate subscriber numbers with a high degree of accuracy and therefore there is significant uncertainty in the level
of future subscriber numbers. Actual results may be materially different from the plan. Adverse changes in the key assumptions,
in particular changes in the quality, pricing or retention of key content contracts, subscriber numbers and ARPU could give rise to a
further impairment of goodwill.
The key forecast cash flow assumptions by CGU are outlined below. For each key assumption management has identified what
a reasonable possible change may be, based on expected ranges which would significantly impact the recoverable amount. The
expected impacts on the CGU recoverable amount which result from a sensitivity to subscribers also captures the change in the
directly attributable variable costs caused by the increase/decrease to subscribers. The expected impact on the CGU recoverable
amount from the cost sensitivities do not capture any changes in revenue which may result if costs were to increase/decrease.
Sensitivity
Sky CGU
Residential Satellite revenues
+/-10% change to subscribers
Streaming revenues
+/-10% change to subscribers
+/-10% change to ARPU
Broadband revenues
+/-10% change to subscribers
+/-10% change to ARPU
+/-10% change to ARPU
Expected impact on CGU
recoverable amount
Upside
$000
Downside
$000
181,618
(181,956)
346,057
(338,166)
39,249
59,064
3,367
19,861
(48,929)
(45,407)
(3,367)
(14,895)
Sky CGU costs
+/-20% change to programming expenses
393,206
(393,206)
+/-10% change to broadcasting and infrastructure costs
+/-1% change to capex as % of revenue
DCF assumptions
+/-2% change to discount rate
+/-1% change to terminal growth rate
RugbyPass CGU
Revenues
+/-10% change to audience reach
+/-10% change to RugbyPass subscribers
+/-10% change to RugbyPass ARPU
Costs
+/-1% change to capex as % of revenue
DCF assumptions
+/-10% change to discount rate
+/-1% change to terminal growth rate
16,205
64,935
68,510
20,867
1,913
706
1,349
571
13,750
453
(16,205)
(64,935)
(50,775)
(18,062)
(1,913)
(763)
(1,349)
(571)
(6,557)
(426)
Market capitalisation comparison
The Group compares the carrying amount of net assets with its market capitalisation value at each reporting balance date. The share
price as at 30 June 2020 was $0.15 equating to a market capitalisation of $261.9 million. As at 8 September 2020, the date prior to
the financial statements being signed, the share price was $0.16 equating to a market capitalisation of $281.2 million. This market
value excludes any control premium and may not reflect the value of the Group’s net assets. The carrying amount of the Group’s net
assets as at 30 June 2020 was $375.0 million ($0.21 per share) following the impairment of goodwill across the Sky and RugbyPass
CGUs. Management and the directors have considered the market capitalisation and net assets and concluded that this has been
adequately considered in determining the appropriate impairment.
66
Notes to the Consolidated Financial Statements (Continued) 16. Borrowings
In NZD 000
Borrowings
Lease liabilities(note 17)
Bonds
30-Jun-20
Current
Non-current
970
-
99,795
1,883
-
-
30-Jun-19
Total
2,853
-
99,795
Current
Non-current
Total
1,093
608
-
90,643
1,796
99,522
91,736
2,404
99,522
100,765
1,883
102,648
1,701
191,961
193,662
Borrowings include bank debt and third party loans.
Bank loans
On 18 May 2020 the Group agreed a Facility Commitment Letter with a syndicate of banks comprising Bank of New Zealand,
Commonwealth Bank of Australia and Westpac Bank which included key terms for the renegotiated bank facility. One of the
terms included in this letter was to undergo an equity raise which the Group successfully completed by raising a total amount of
approximately $157,000,000 (refer to note 19). The Facility Commitment Letter also granted a waiver for COVID-19 pandemic
related business activity that could affect the Group's covenant compliance.
On 2 July 2020 the Group signed a renegotiated bank facility with a syndicate of banks comprising Bank of New Zealand,
Commonwealth Bank of Australia and Westpac Bank securing a facility of $200 million ending on 31 July 2023.
The renegotiated facility does not include a stepdown in facility limit during the term of the facility. Previously the Group’s
bank facility was for a value of $200 million expiring in July 2022 with the facility reducing to $150 million from July 2021.
The facility arrangements (together with certain hedging arrangements and the existing $100 million bond) take the benefit of
shared security granted by certain members of the Group, including (i) a general security deed granted by each of Sky Network
Television Limited and Outside Broadcasting Limited, (ii) real property mortgages granted over certain real property interests of Sky
Network Television Limited and (iii) a spectrum mortgage granted over certain spectrum. In addition, the renegotiated bank facility
also provides for RugbyPass Limited to accede to the shared security arrangements by providing a guarantee and general security
deed. The loan facility is subject to certain covenant clauses whereby the Group is required to meet certain key financial ratios.
There have been no breaches of covenant clauses and no breaches are anticipated within the next 12 months.
Bank overdrafts of $1,902,000 (30 June 2019; $6,780,000) have been set off against cash balances.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption
value being recognised in profit or loss over the period of the borrowings, using the effective interest method. Borrowings
are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance date.
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less. Bank overdrafts
that are repayable on demand and which form an integral part of the Group’s cash management are included as a component
of cash and cash equivalents for the purpose of the statement of cash flows.
Bonds
On 31 March 2014 the Group issued bonds for a value of $100 million which were fully subscribed.
Terms and conditions of outstanding bonds are as follows:
Nominal interest rate
Market yield
Issue date
Date of maturity
In NZD 000
Carrying amount
Fair value
Face value
30-Jun-20
30-Jun-19
Bond
6.25%
4.37%
31-Mar-14
31-Mar-21
99,795
101,380
100,000
Bond
6.25%
3.58%
31-Mar-14
31-Mar-21
99,522
104,523
100,000
67
Sky / 2020 Annual Report 16. Borrowings (Continued)
Bonds are recognised initially at fair value less costs of issue. Costs of issue are amortised over the period of the bonds.
Subsequent to initial recognition, bonds are stated at amortised cost with any difference between cost and redemption value
being recognised in profit or loss over the period of the bonds, using the effective interest method. Bonds are classified in the
consolidated balance sheet as current liabilities since settlement of the liability is due within 12 months after the balance date.
The difference between carrying amount and fair value has not been recognised in the consolidated financial statements as
the bonds are intended to be held until maturity.
Changes in liabilities arising from financing activities
In NZD 000
1 July 2019
NZ IFRS 16 Additions Repayment
Fees
Reclass
movements 30 June 2020
Adoption
Other
Current liabilities
Third party loan
Bonds
Finance lease
Lease liabilities
Derivatives - Interest rate
Non- current liabilities
Borrowings
Third party loan
Finance lease
Lease liabilities
Bonds
Derivatives - Interest rate
1,093
-
608
-
631
87,356
3,287
1,796
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,093)
-
-
-
-
-
-
-
-
-
970
99,795
(608)
36,562
-
-
-
-
-
(631)
970
99,795
-
36,562
-
(289)
2,172
-
119,000
(207,000)
212
143
-
-
-
-
(1,115)
(1,796)
-
-
-
(34,156)
(3,025)
73,303
-
95,357
52,028
(36,901)
99,522
(11)
-
-
-
-
-
-
194,282
95,357
171,028
(244,994)
485
-
-
-
-
273
(99,795)
-
-
-
11
-
-
(3,645)
212,513
Other
In NZD 000
1 July 2018
Additions Repayment
Fees
Reclass
movements 30 June 2019
Current liabilities
Borrowings
Finance lease
Derivatives - Interest rate
Non- current liabilities
Borrowings
Third party loan
Finance lease
Bonds
Derivatives - Interest rate
458
582
412
130,822
1,803
2,429
99,250
1,475
237,231
-
-
-
-
-
-
-
-
-
257,000
(300,000)
(466)
3,205
-
-
-
(1,086)
(607)
-
-
-
-
272
-
635
26
219
-
(635)
(26)
-
-
-
-
-
-
-
1,093
608
631
87,356
3,287
1,796
99,522
(219)
(1,267)
(11)
260,205
(301,693)
(194)
-
(1,267)
194,282
Other movements include, exchange differences, and changes in fair value.
68
Notes to the Consolidated Financial Statements (Continued) 17. Lease Liabilities
This note provides information for leases where the Group is a lessee
In NZD 000
Lease liabilities
Transition balance on 1 July 2019
Reclassification of finance leases previously recognised
Additions for the period
Add interest for period
Lease terminations
Held for sale (note 11)
Less repayments
Foreign currency revaluation
Balance at 30 June 2020
Current
Two to five years
More than five years
Transmission
Property
Equipment
75,353
8,954
-
-
42,875
5,628
2,258
-
-
(30,459)
1,411
550
(913)
(1,270)
(2,261)
-
91,438
10,688
29,828
61,610
-
1,979
7,981
728
8,211
2,413
3,504
530
-
-
(7,375)
249
7,532
4,657
2,875
-
Motor
vehicles
426
-
21
19
-
(96)
Total
92,944
2,413
52,028
3,357
(913)
(1,366)
(163)
(40,258)
-
1,660
207
109,865
98
109
-
36,562
72,575
728
91,438
10,688
7,532
207
109,865
Expense relating to short term leases for the period included in expenses in the consolidated statement of comprehensive income
is $6,471,000. A property lease was terminated during the period resulting in a lease gain of $50,000 which is recorded in other
income in the profit or loss statement.
On 29 June 2020 the Group agreed a variation of its satellite lease with Optus which extended the lease period until the launch of
a new satellite which is expected to be between 31 December 2023 and 31 May 2024. The lease also alters the payment profile of
the transponders and allows the Group to utilise between five and seven transponders. The variation has been treated as a lease
modification which increased lease assets and lease liabilities by a value of $42,875,000.
The Group leases various properties, transmission equipment, motor vehicles and sundry equipment. Rental contracts vary
between one and five years with some office leases containing renewal options. Sky has incorporated renewal options into
the lease term where it is reasonably certain that the lease will be extended.
69
Sky / 2020 Annual Report 17. Lease Liabilities (Continued)
For higher value contracts the Group makes adjustments to the borrowing rate after considering the effect of the lease term,
the currency and value of the lease, any security given, and the economic environment in which the Group operates.
For leases where there are renewal options the lease payments may change. When lease payments are adjusted, the lease
liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance
cost. The finance cost is charged to profit or loss over the lease period.
Critical judgements in determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise
a renewal option. Renewal options are only included in the lease term if the option is reasonably certain to be exercised.
Most of the Group’s property leases contain renewal options, and generally where it is likely that these options will be exercised
they have been included in the calculation of the lease liability. Management reassesses the likelihood of exercising termination
options at each reporting date or when there is any significant change in circumstances. Any changes in the lease term or value
affect the valuation of the liability and the right-of-use asset and are adjusted accordingly.
The COVID-19 pandemic has resulted in some lessors providing the Group with lease concessions for periods of up to three
months. These concessions have not resulted in any changes in either the lease asset or the lease liability (refer note 13).
The value of lease concessions received is $749,000. These are recorded as a deduction from operating expenses.
18. Finance Costs, Net
In NZD 000
Finance income
Interest income
Finance expense
Interest expense on bank loans
Interest expense on bonds
Lease interest
Amortisation of bond costs
Bank facility finance fees
Total interest expense
Unrealised exchange loss/(gain) - foreign currency payables
Unrealised exchange loss - foreign currency hedges
Realised exchange (gain)/loss - foreign currency payables
30-Jun-20
30-Jun-19
(161)
(161)
5,952
6,155
3,357
273
283
16,020
401
1,552
(4,073)
13,739
(275)
(275)
6,564
6,132
261
272
666
13,895
(599)
341
(920)
12,442
Interest income is recognised on a time-proportion basis using the effective interest method, which is the rate that exactly
discounts estimated future cash flow receipts through the expected life of the financial asset to that asset's net carrying amount.
Borrowing costs directly attributable to acquisition, construction or production of an asset that takes a substantial period of
time to prepare for its intended use are capitalised as part of the cost of the respective assets. All other borrowing costs are
expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group incurs
with the borrowing of funds.
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated to New Zealand dollars
at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not re-translated. Foreign exchange gains and losses resulting from the settlement
of foreign currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in profit and loss except where hedge accounting is applied and foreign
exchange gains and losses are deferred in other comprehensive income.
70
Notes to the Consolidated Financial Statements (Continued) 19. Share Capital
Shares on issue at 30 June 2019
Shares issued for purchase of RugbyPass
Shares issued to NZ Rugby Union
Shares issued to Chief Executive
Rights issue and placement May 2020
Less transaction costs
Notes
Number of shares (000)
Ordinary shares (NZD 000)
27
9
28
389,140
25,085
21,801
200
1,310,053
-
1,746,279
577,403
24,378
15,436
386
157,091
(7,086)
767,608
On 19 August 2019 Sky issued 25,085,408 shares at a value of $1.24 to RugbyPass Investors,LLC as part of the consideration
for the purchase of RugbyPass (refer note 27).
On 1 November 2019 Sky issued 21,801,325 shares at a value of $0.92 to the NZ Rugby Union as part of the consideration in
relation to the SANZAAR and Rugby Union Partnership agreement. The shares were valued at fair value being the listed price on
the acquisition date less an attributable discount (refer note 9). The Group has measured the value of the consideration received
indirectly by reference to the fair value of the equity instruments granted and recorded this as a prepayment for programme rights.
On 21 February 2020, 200,000 ordinary shares were issued to Sky’s Chief Executive Martin Stewart as part of Mr Stewart’s
employment agreement with Sky at a value of $1.93 per share.
On 21 May 2020 the Group announced an equity raising at an offer price of NZ$0.12 per share, comprising: a fully underwritten $9.0
million institutional placement and fully underwritten $148.0 million pro-rata non-renounceable accelerated entitlement offer (the
Offer) to eligible shareholders, at a ratio of 2.83 for 1. A total of 1,310,053,040 new shares were issued under the Offer raising a total
amount of approximately $157.0 million. Transaction costs of $7.1 million have been deducted from the proceeds of the Offer.
Due to restriction clauses in both contracts for disposal of the shares, a discount has been allocated to determine the fair value
of the consideration for the shares as follows:
In NZD 000
Shares issued at market value
Translation adjustment
Less discount
Fair value of consideration
RugbyPass
NZ Rugby Union
31,106
(1,506)
(5,222)
24,378
20,057
-
(4,621)
15,436
71
Sky / 2020 Annual Report Hedge
reserve
Share based
compensation
reserve
Currency
translation
reserve
Total
reserves
Notes
(214)
161
28
19
7
28
7
-
-
-
2,243
(1,098)
(321)
610
9,032
-
(911)
(11,932)
3,597
(214)
-
220
-
-
-
-
-
386
(386)
-
-
-
161
220
-
161
-
-
-
161
-
-
-
-
-
-
(53)
220
386
(386)
2,243
(1,098)
(321)
991
9,032
161
-
(911)
(11,932)
3,597
(53)
20. Reserves
In NZD 000
As at 30 June 2020
Balance as at 1 July 2019
Translation of subsidiary
Employee share scheme
Credit to equity for equity-settled share based payment
Cash flow hedges (net of tax)
Revaluation
Reclassification to profit or loss
Deferred tax
Balance at 30 June 2020
As at 30 June 2019
Balance as at 1 July 2018
Employee share scheme
Cash flow hedges (net of tax)
Revaluation
Reclassification to profit or loss
Deferred tax
Balance at 30 June 2019
72
Notes to the Consolidated Financial Statements (Continued) 21. Derivative Financial Instruments
In NZD 000
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value through
profit or loss
Total interest rate derivatives
Forward foreign exchange contracts
- cash flow hedges
Forward foreign exchange contracts
- dedesignated
30-Jun-20
30-Jun-19
Notes
Assets Liabilities
Notional
amounts
Assets Liabilities
Notional
amounts
-
-
-
-
-
-
-
-
-
-
(855)
60,000
235
-
10,000
235
(855)
70,000
2,926
(683)
127,920
4,557
(4,282)
343,162
800
(644)
102,910
1,791
(536)
43,596
Total forward foreign exchange derivatives
3,726
(1,327)
230,830
6,348
(4,818)
386,758
Analysed as:
Current
Non-current
Derivatives used for hedging - cash flow hedges
At fair value through profit or loss
17
17
3,726
(1,327)
230,830
6,583
(5,673)
456,758
3,265
(922) 165,900
5,019
(2,721) 291,656
461
(405)
64,930
1,564
(2,952) 165,102
3,726
2,926
(1,327) 230,830
(683) 127,920
6,583
4,557
(5,673) 456,758
(5,137) 403,162
800
(644)
102,910
2,026
(536)
53,596
3,726
(1,327) 230,830
6,583
(5,673) 456,758
Foreign exchange rates
Foreign exchange rates used at balance date for the New Zealand dollar are:
USD
AUD
GBP
EUR
JPY
30-Jun-20
0.6402
0.9342
0.5216
0.5712
68.9423
30-Jun-19
0.6714
0.9561
0.5288
0.5896
72.4434
73
Sky / 2020 Annual Report
21. Derivative Financial Instruments (Continued)
Sensitivity analysis for foreign exchange
A 10% strengthening or weakening of the NZD against the following currencies as at 30 June would have resulted in changes to
equity (hedging reserve) and unrealised gain/losses (before tax) as shown below. Based on historical movements, a 10% increase
or decrease in the NZD is considered to be a reasonable estimate. This analysis assumes that all other variables, in particular
interest rates, remain constant. The analysis is performed on the same basis for the prior year.
In NZD 000 GAIN/(LOSS)
Equity
Profit or loss
Equity
Profit or loss
10% rate increase
10% rate decrease
As at 30 June 2020
Foreign currency payables
USD
AUD
Foreign exchange hedges
USD
AUD
As at 30 June 2019
Foreign currency payables
USD
AUD
Foreign exchange hedges
USD
AUD
Interest rates
-
-
(3,535)
(8,262)
(11,797)
-
-
(12,810)
(17,980)
(30,790)
3,036
6,222
(2,804)
(6,553)
(99)
2,334
2,057
(2,174)
(1,848)
369
-
-
4,321
10,098
14,419
-
-
16,565
21,975
38,540
(3,711)
(7,640)
3,427
8,009
85
(2,852)
(2,515)
2,658
2,258
(451)
During the year ended 30 June 2020, interest rates on borrowings varied in the range of 2.1% to 6.25% (30 June 2019:3.2% to 6.5%).
The Group’s interest rate structure is as follows:
In NZD 000
Assets
30-Jun-20
30-Jun-19
Notes
Effective
interest rate
Current Non-current
interest rate Current Non-current
Effective
Cash and cash equivalents
0.41% 110,677
-
3.01% 4,283
-
Liabilities
Borrowings
Lease liabilities
Finance leases
Bonds
Derivatives
Floating to fixed interest rate swaps
Fixed to floating interest rate swaps
16
17
17
16
5.42%
(970)
(1,883)
6.52% (1,093)
(90,643)
4.30% (36,562)
(73,303)
-
-
-
-
-
6.16% (99,795)
-
-
-
-
-
-
6.58%
(608)
(1,796)
6.13%
-
(99,522)
50,000
10,000
-
10,000
(26,650)
(75,186)
52,582
(171,961)
Gains and losses on interest rate hedges recognised in the hedging reserve in equity (note 20) are released to profit or loss within
finance cost until the repayment of the bank borrowings.
74
Notes to the Consolidated Financial Statements (Continued) Sensitivity analysis for interest-bearing instruments
As at 30 June 2020 the Group does not hold any variable rate loans nor any interest rate hedges. In the prior year a change of 100
basis points in interest rates on the reporting date, would have increased/(decreased) the hedging reserve in equity and profit or
loss (before tax) by the amounts shown below. Based on historical movements, a 100 basis point movement is considered to be a
reasonably possible estimate. This analysis assumes that all other variables remain constant.
In NZD 000 GAIN/(LOSS)
As at 30 June 2019
Variable rate instruments - bank loans
Interest rate hedges - cash flow
100 BP Increase
100 BP decrease
Equity
Profit or loss
Equity
Profit or loss
-
204
204
(880)
-
(880)
-
(204)
(204)
880
-
880
Derivative financial instruments
Derivative financial instruments are used to hedge the Group’s exposure to foreign exchange and interest rate risks.
The Group does not hold or issue derivatives for trading purposes. However, derivatives that do not qualify for hedge
accounting are accounted for as trading instruments. Derivative financial instruments are initially recognised at fair value
on the date a derivative contract is entered into and are re-measured at their fair value at subsequent reporting dates.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged.
At inception the Group documents the relationship between hedging instruments and hedged items, as well as its
risk management objective and strategy for undertaking various hedge transactions. This process includes linking all
derivatives designated as hedges to specific assets and liabilities or to specific firm commitments or forecast transactions.
The Group also documents its assessment, both at hedge inception and on an on-going basis, of whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.
Derivatives consist of currency forwards and interest rate swaps. The fair value is recognised in the hedging reserve within
equity until such time as the hedged item will affect profit or loss. The amounts accumulated in equity are either released
to profit or loss or used to adjust the carrying value of assets purchased. For example, when hedging forecast purchase of
programme rights in foreign currency, the gains and losses previously deferred in equity are transferred from equity and
included in the initial measurement of the cost of the programme rights. The deferred amounts are ultimately recognised
in programme rights' expenses in profit or loss.
Amounts accumulated in the hedging reserve in equity on interest rate swaps are recycled in profit or loss in the periods
when the hedged item affects profit or loss (for example when the forecast interest payment that is hedged is made).
The gain or loss relating to any ineffective portion is recognised in profit or loss as “interest rate swaps - fair value" in
finance costs. The gain or loss relating to interest rate swaps which do not qualify for hedge accounting is recognised in
profit or loss within the interest expense charge in "finance costs, net".
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction
is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately transferred to profit or loss. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are recognised immediately in profit or loss.
75
Sky / 2020 Annual Report 22. Financial Risk Management - Market Risk
Financial risk management objectives
The Group undertakes transactions in a range of financial instruments which include cash and cash equivalents, receivables,
payables, derivatives and various forms of borrowings including bonds and bank loans.
These activities result in exposure to financial risks that include market risk (currency risk, fair value interest rate risk, cash flow
interest rate risk and price risk), credit risk and liquidity risk.
The Group seeks to minimise the effects of currency and interest rate risks by using derivative financial instruments to hedge
these risk exposures. The use of financial derivatives is governed by the Group's policies approved by the Board of directors, which
provides written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative
financial instruments, and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
The Corporate Treasury function reports monthly to the Board. The Audit and Risk Committee (a standing committee of the
Board) is responsible for developing and monitoring the Group's risk management policies and advising the Board in this respect.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return on risk.
The Group buys and sells derivatives in the ordinary course of business, and also incurs financial liabilities, in order to manage
market risks. All such transactions are carried out within the guidelines set by the Board. In general the Group seeks to apply
hedge accounting in order to manage income statement volatility.
a) Foreign exchange risk
The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Australian
dollar and the United States dollar in relation to purchases of programme rights and the lease of transponders on the satellite.
Foreign exchange risk arises when purchases are denominated in a currency that is not the entity's functional currency. The net
position in each foreign currency is managed by using forward currency contracts and foreign currency options and collars to limit
the Group's exposure to currency risk.
The Group's risk management policy is to hedge foreign capital expenditure (capex) and foreign operating expenditure (Opex)
in accordance with the following parameters. Approximately 90% of anticipated transactions in each major currency qualify as
'highly probable' forecast transactions for hedge accounting purposes.
Period
Minimum hedging
Maximum hedging
Capex order greater than NZD $250,000
Time of issuing order
Fixed commitments greater than $750,000
Up to 3 years
Variable commitments
>3 years
0-12 months
13-24 months
25-36 months
100%
100%
0%
85%
0%
0%
100%
100%
100%
95%
50%
30%
Due to COVID-19 there was uncertainty of timing of future foreign currency commitments and the Board approved an exemption
to operate outside the hedging policy until the commitments are confirmed.
76
Notes to the Consolidated Financial Statements (Continued) The Group's exposure to foreign currency risk that has been covered by forward foreign exchange contracts is as follows:
In NZD 000
Foreign currency payables
30-Jun-20
30-Jun-19
USD
AUD
OTHER
USD
AUD
OTHER
(33,397)
(67,013)
(1,162)
(25,672)
(22,631)
Dedesignated forward exchange contracts
30,500
72,410
-
24,731
18,865
Net balance sheet exposure
Forward exchange contracts
(for forecasted transactions)
Total forward exchange contracts
(2,897)
5,397
(1,162)
(941)
(3,766)
37,060
90,860
67,560
163,270
-
-
138,500
204,662
163,231
223,527
(487)
-
(487)
-
-
b) Cash flow and fair value interest rate risk
The Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy is to maintain its
borrowings in fixed rate instruments as follows:
Variable rate borrowings
Period
Minimum hedging
Maximum hedging
1- 3 years
3-5 years
5-10 years
40%
20%
0%
90%
60%
30%
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. Under the interest rate swaps, the Group agrees
with other parties to exchange, at specified intervals (quarterly), the difference between fixed contract rates and floating rate
interest amounts calculated by reference to the agreed notional principal amounts. The Group also enters into fixed-to-floating
interest rate swaps to hedge fair value interest rate risk arising where it has borrowed at fixed rates. The Board approved short
term exemptions for interest rate hedging parameters while the long term capital structure is revisited.
23. Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises from cash and cash equivalents, deposits with banks, derivative financial instruments and
the Group's receivables from customers. The carrying amount of these financial assets represents the maximum exposure to
credit risk at year end.
Credit control assesses the credit quality of the customer, taking into account, its financial position, past experience and
other factors. In monitoring customer credit risk, customers are grouped according to their classification and their credit
characteristics and the existence of any previous financial difficulties.
Credit risk with respect to individual residential and commercial customer receivables is limited due to the large number of
subscribers included in the Group's subscriber base. The credit risk for advertising, wholesale and reseller customers is assessed
individually and trade receivables aging is reviewed monthly. In addition, receivables balances are monitored on an on-going
basis with the result that the Group's exposure to bad debts is not significant. The Group establishes an impairment loss
that represents its estimate of expected credit losses in respect of trade receivables. The main component of the impairment
loss is based on a collective loss component established for Groups of similar assets in respect of losses that have been incurred
but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar
financial assets (refer note 8).
As a result of the COVID-19 pandemic the Group has increased its expected loss rates due to the uncertain future outlook for
its residential and commercial satellite customers. The ability of these customers to settle receivables in the near future is not
currently considered to relate to the recent historical credit risk characteristics of those customers.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Group has policies
that limit the amount of credit exposure to any one financial institution. The maximum exposure to credit risk on the derivative
financial instruments is the value of the derivative assets' receivable portion of $3,726,000 (30 June 2019: $6,583,000).
77
Sky / 2020 Annual Report
24. Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Prudent liquidity risk
management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate amount
of committed credit facilities and the ability to close out market positions. The Group aims to maintain flexibility in funding by
keeping committed credit lines available. During COVID-19 the Group has strengthened its focus on managing working capital
including increase in control around accounts payable, more frequent review of cash balances, and a higher level of interaction
with customers having overdue balances.
Management monitors the Group's cash requirements, on a daily basis, against expected cash flows based on a rolling daily
cash flow forecast for at least 90 days in advance. In addition management compares actual cash flow reserves against forecast
and budget on a monthly basis.
Current liabilities exceed current assets at 30 June 2020 due to the Group's bonds maturing in March 2021 (refer note 16). The
Group had an undrawn facility balance of $200,000,000 as at 30 June 2020 (30 June 2019: $112,000,000) that can be drawn down
to meet short-term working capital requirements. The facility limit at 30 June 2020 is $200,000,000 (30 June 2019: $200,000,000).
The table below analyses the Group's financial liabilities into relevant maturity Groupings based on the remaining period from
the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows, including interest payments in respect of financial liabilities and the net settled interest rate derivatives that are in a loss
position at balance date. Balances due within 12 months equal their carrying value as the impact of discounting is not significant.
In NZD 000
At 30 June 2020
Non derivative financial liabilities
Other loans
Lease liabilities
Bonds
Trade and other payables
Contingent consideration
Derivative financial liabilities
Forward exchange contracts used
for hedging -net outflow/inflow (1)
At 30 June 2019
Non derivative financial liabilities
Secured bank loans
Other loans
Finance leases
Bonds
Trade and other payables
Derivative financial liabilities
Forward exchange contracts used
for hedging -net outflow/inflow (1)
Interest rate swaps (1)
Notes
Carrying
amount
Contractual
cash flows
Less than
one year
1-2 years
>3 years
16
17
16
10
27
21
16
16
17
16
10
21
21
2,853
(3,391)
(1,172)
(1,172)
(1,047)
109,865
(114,696)
(38,662)
(27,695)
(48,339)
99,795
(106,250)
(106,250)
-
145,690
(145,690)
(145,690)
5,283
(5,283)
-
(5,283)
1,327
(1,330)
(923)
(407)
-
-
-
364,813
(376,640)
(292,697)
(34,557)
(49,386)
87,356
(96,672)
4,380
2,404
(4,564)
(2,673)
(2,834)
(1,172)
(728)
(2,834)
(1,172)
(728)
99,522
(110,942)
(6,250)
(104,692)
113,618
(113,618)
(113,618)
-
(91,004)
(2,220)
(1,217)
-
-
4,818
855
(4,905)
(603)
(2,107)
(545)
(1,912)
(58)
(886)
-
312,953
(333,977)
(127,254)
(111,396)
(95,327)
1) The table excludes the contractual cash flows of the interest rate swaps and forward exchange contracts which are included in assets.
78
Notes to the Consolidated Financial Statements (Continued)
The table below analyses the Group's foreign exchange derivative financial instruments which will be settled on a gross basis into
relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows. Inflows have been calculated using balance date spot rates.
Contractual
cash flows
foreign
exchange
amount
Exchange
rate
Contractual
cash flows
Less than
one year
1-2 years
3-5 years
(67,560)
(62,655)
(4,905)
(163,270)
(103,245)
(60,025)
0.6402
0.9342
44,676
69,783
64,718
152,559
163,304
103,267
2,257
2,085
5,066
60,038
174
-
-
-
-
-
(163,231)
(132,549)
(223,527)
(109,106)
(28,118)
(79,829)
(2,564)
(34,592)
0.6714
0.9561
114,011
169,810
208,508
218,086
1,138
137,892
106,450
2,687
29,251
77,886
2,667
33,750
(810)
(739)
In NZD 000
At 30 June 2020
Forward foreign exchange contracts
Outflow (at FX hedge rate)
USD
AUD
Inflow (at year end market rate)
USD
AUD
At 30 June 2019
Forward foreign exchange contracts
Outflow (at FX hedge rate)
USD
AUD
Inflow (at year end market rate)
USD
AUD
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to
provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure. In May 2020 the
Group conducted an equity raise comprised of a placement of shares to institutional investors and a pro-rata non-renounceable
entitlement offer of shares to eligible shareholders of 2.83 new shares for every 1 existing at the record date at an offer price of
12 cents per share (the Offer). The Offer was fully underwritten and raised a total of approximately $157 million. The Offer raise
was conducted to help ensure the Group is well capitalised to withstand the impacts of COVID-19 and positioned to execute on
future growth opportunities as conditions improve.
The capital structure of the Group consists of debt which includes the borrowings disclosed in note 16, cash and cash equivalents
and equity attributable to equity holders of Sky comprising share capital, reserves and retained earnings as disclosed in note 19.
The Board reviews the Group’s capital structure on a regular basis. The Group has a facility agreement in place with a syndicate
of banks and a retail bond issue as described in note 16. The Group’s bank loan facility is subject to a number of covenants,
including interest and debt cover ratios, calculated and reported quarterly, with which it has complied for the entire year
reported (2019: complied).
As at 30 June 2020 the Group’s debt excluding lease liabilities is $102 million (30 June 2019: $191 million). This is covered by cash
reserves of $111 million.
79
Sky / 2020 Annual Report 24. Liquidity Risk (Continued)
Fair value estimation
The methods used to estimate the fair value of financial instruments are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs),
for example discounted cash flow.
The Group’s financial assets and liabilities carried at fair value are valued on a level 2 basis.
In NZD 000
Assets measured at fair value
Dedesignated forward exchange contracts
Derivatives used for hedging - cash flow hedges
Total assets
Liabilities measured at fair value
Contingent consideration
Dedesignated forward exchange contracts
Derivatives used for hedging - cash flow hedges
Total liabilities
Note
30-Jun-20
30-Jun-19
21
21
26,27
21
21
2,926
800
3,726
(5,283)
(683)
(644)
(6,610)
2,026
4,557
6,583
-
(536)
(5,137)
(5,673)
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
The Group uses a variety of methods and assumptions that are based on market conditions existing at each balance date.
Techniques, such as estimated discounted cash flows, are used to determine the fair value of financial instruments. The fair
value of forward exchange contracts is based on market forward foreign exchange rates at year end. The fair value of interest
rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the reporting date, taking
into account current interest rates, observable yield curves and the current creditworthiness of the swap counterparties.
Contingent consideration is valued on a level 2 basis at market value less an appropriate discount rate (refer note 26).
80
Notes to the Consolidated Financial Statements (Continued) 25. Classification of Financial Instruments
Financial assets are classified in the following categories: those to be measured subsequently at fair value through other
comprehensive income or profit or loss, and those to be measured at amortised cost. The classification depends on the purpose
for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition
and re-evaluates this designation at each reporting date.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income.
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to
purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risk and rewards of ownership.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition of the financial assets. Transaction costs
of financial assets carried at fair value through profit or loss are expensed in profit or loss.
The following table presents the Group’s financial assets and liabilities according to classifications:
In NZD 000
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Derivatives designated as hedging instruments (cash flow hedges)
Derivatives not designated as hedging instruments
Financial liabilities at amortised cost
Bank loans
Other loans
Bonds
Lease liabilities
Finance leases
Trade and other payables
Contingent consideration
Financial liabilities at fair value through OCI
Derivatives designated as hedging instruments (cash flow hedges)
Derivatives not designated as hedging instruments (fair value hedges)
30-Jun-20
30-Jun-19
Notes
Carrying
amount
Fair value
Carrying
amount
Fair value
110,677
110,677
4,283
4,283
8
45,314
45,314
53,134
53,134
21
21
16
16
16
17
17
10
26
21
21
2,926
800
2,926
800
4,557
2,026
4,557
2,026
159,717
159,717
64,000
64,000
(434)
3,287
(434)
87,356
85,678
3,218
4,380
4,260
99,795
101,380
99,522
104,523
109,865
102,463
-
-
-
-
2,404
2,440
145,690
145,690
113,618
113,618
5,283
5,283
-
-
683
644
683
644
5,137
536
5,137
536
364,813
358,927
312,953
316,192
Prepaid expenses, contract liabilities, unearned subscriptions, tax payables and employee benefits do not meet the definition of a
financial instrument and have been excluded from the “Trade and other receivables” and Trade and other payables” categories above.
The fair values of financial assets and financial liabilities are determined as follows:
Cash and cash equivalents, trade and other receivables carried at amortised cost, trade and other payables, and other current
liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of quoted notes and bonds is based on price quotations at the reporting date being a level 1 basis. The fair value of
loans from banks and lease liabilities is estimated on a level 3 basis by discounting future cash flows using rates currently available
for debt on similar terms, credit risk and remaining maturities.
Impairment of financial assets
From 1 July 2019, the Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments
carried at amortised costs and fair value through other comprehensive income. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by NZ IFRS 8, which requires expected lifetime losses
to be recognised from initial recognition of the receivables (Refer note 8 for further details).
81
Sky / 2020 Annual Report 26. Contingent Consideration and Provisions
In NZD 000
Earnout on acquisition of RugbyPass
Provision for holiday pay
Provision for onerous contracts
Provision for restructuring
Balance at 30 June 2020
Current - within one year
Long term - later than one year
Notes
RugbyPass
27
5,283
-
-
5,283
-
5,283
5,283
10
Holidays
Act 2003
compliance
provision
Other
provisions
-
3,215
-
-
3,215
3,215
-
3,215
-
-
670
5,389
6,059
6,059
-
Total
5,283
3,215
670
5,389
14,557
9,274
5,283
6,059
14,557
Earnout on acquisition of RugbyPass
The acquisition agreement allows for a maximum earnout amount of USD10 million based on the achievement of certain
specified targets during the earnout period from 1 January 2020 to 31 December 2022. The agreement also provides for an interim
earnout amount of up to a maximum of USD 3.5 million payable for the 18 month period from 1 January 2020 to 30 June 2021.
The contingent consideration was valued at NZD 5.3 million as at acquisition date (refer note 27).
Holidays Act 2003 compliance provision
Included within other provisions is a provision for holiday pay of $3,215,000. This provision arose from leave entitlement calculation
issues under the Holidays Act 2003 and represents management’s best estimate of outstanding remediation payments to the
affected current and former staff. The provision contains an element of uncertainty around the anticipated rate of success in
tracing former staff and judgement has been applied in estimating this rate.
Other provisions
These include restructuring and provision for onerous contracts. The restructuring provision is mostly comprised of redundancy
costs incurred as a result of the Group’s change in strategic direction (refer note 3) and are expected to be paid out in the short
term. Redundancy costs of $15,479,000 have been included within employee costs in the profit and loss statement (refer note 5).
Provisions are recognised when:
• There is a present legal or constructive obligation as a result of past events;
• It is more likely than not that an outflow of economic resources will be required to settle the obligation; and
• The amount can be reliably estimated.
Measurement is the present value of the expenditure expected to be required to settle the obligation.
Key estimates and judgements
Provision for remediation of under‐payments under the Holidays Act 2003. The estimated liability has been calculated on
a sample basis and extrapolated across the population of employees and former employees impacted. The sample was
selected from across the business and detailed calculations of the underpayments were completed for the sample. Both the
sample and full population of employees were grouped across occupational groupings to extrapolate the underpayments and
reach the estimated liability. Sky has consulted with an expert and obtained external legal advice where necessary to ensure
correct interpretation of Sky’s employment agreements against the Holidays Act 2003. Key decisions and methodologies
were documented, presented and discussed with the Audit and Risk Committee. Due to the complexity involved in calculating
amounts due to individual employees, it is possible that more information could become available which results in a material
change to the liability.
RugbyPass - Contingent consideration. As at 30 June 2020, Sky reassessed the fair value of the contingent consideration
and considered it appropriate to continue to recognise this at NZD 5.3 million. In coming to this conclusion, Sky has considered
the current performance of RugbyPass, the uncertainty surrounding the current economic environment given the existence
of COVID-19 and the probability of payment. Management will keep monitoring performance and continue to revisit this
provision in light of events outside Sky’s control and changes in strategic direction driven by those events and other market
circumstances.
82
Notes to the Consolidated Financial Statements (Continued) 27. Business Acquisitions
On 19 August 2019 the Group, through its subsidiary Sky Investment Holdings Limited, acquired 100% of the share capital
of RugbyPass Limited (Ireland) and RugbyPass Asia Pte Limited (together RugbyPass).
The acquisition has significantly expanded the Group’s reach into the global rugby market. RugbyPass is an online destination
for global rugby fans, offering a live streaming rugby service across Asia, Australia and Europe, along with a wide array of
original video content, news, analysis, statistics and a world-first rugby player and team rankings system, the RugbyPass Index.
On 31 January 2020 Sky acquired 100% of the share capital Lightbox New Zealand Limited (Lightbox) from Spark New Zealand
Limited (Spark). Lightbox is an entertainment streaming service operating in New Zealand. The assets acquired include subscribers,
technology platforms to manage customers and provide entertainment content to a wide range of devices, prepaid content rights and
the Lightbox brand. Spark continues to make Lightbox and its successor service Neon available to its customers for an agreed period.
Details of the purchase consideration, the net assets acquired, and goodwill for both acquisitions are as follows:
In NZD 000
Cash paid
Payable for acquisition
Ordinary shares issued
Contingent consideration
Total consideration
Notes
RugbyPass
10
19
26
15,633
-
24,378
5,283
45,294
Lightbox
2,977
10,522
-
-
13,499
Total
18,610
10,522
24,378
5,283
58,793
The fair value of the 25,085,408 shares issued as part of the consideration paid for RugbyPass was based on the published share
price on 19 August 2019 of $1.24 per share less an attributable discount (refer Note 19).
Based on the best information available at the reporting date, the provisionally determined fair value of the assets and liabilities
recognised as a result of the acquisitions are as follows:
In NZD 000
Cash
Trade and other receivables
Inventories
Intangible assets
Property, plant and equipment
Trade payables
Deferred revenue
Deferred tax liability
Other liabilities
Net identifiable assets acquired
Add goodwill
Fair value of purchase consideration
Notes
RugbyPass
Lightbox
9
14
12
7
441
734
1,882
7,851
-
(2,081)
(76)
(711)
(1,227)
6,813
38,481
45,294
-
614
7,635
8,118
385
(1,565)
(267)
(1,212)
(209)
13,499
-
13,499
Total
441
1,348
9,517
15,969
385
(3,646)
(343)
(1,923)
(1,436)
20,312
38,481
58,793
RugbyPass Limited (Ireland) has accumulated losses relating to prior years of EUR 14,991,000 as at 31 December 2018, that it is
able to utilise against taxable income in the future. No deferred tax asset has been recognised for these losses as the timing and
extent of their recoverability is uncertain.
For financial reporting purposes the assets and liabilities of RugbyPass have been valued and consolidated as if the acquisition had
occurred on 1 July 2019 which is the date the Group effectively obtained control of RugbyPass. RugbyPass contributed revenue
of $4,653,000 and losses of $14,506,000 to the Group for the period 1 July 2019 to 30 June 2020. This excludes impairment of
RugbyPass goodwill of $27,500,000 which is recorded in the parent company Sky Investment Holdings Limited (refer note 15).
A deferred tax asset has not been recorded as recovery is not expected in the short term.
Lightbox contributed revenue of $10,456,000 and losses of $3,968,000 to the Group for the period 1 February 2020 to 30 June 2020.
Revenue and earnings for the year from 1 July 2019 to 30 June 2020 have not been disclosed as this is not practicable due to the
limited information available.
83
Sky / 2020 Annual Report 27. Business Acquisitions (Continued)
Significant estimate: RugbyPass contingent consideration
The acquisition agreement for RugbyPass allows for a maximum earnout amount of USD 10.0 million based on the achievement
of certain specified targets during the earnout period from 1 January 2020 to 31 December 2022. The agreement also provides
for an interim earnout amount of up to a maximum of USD3.5 million for the 18-month period from 1 January 2020 to 30 June
2021. The contingent consideration has been valued at NZD 5.3 million at the acquisition date. As at 30 June 2020, Sky continues
to measure the fair value of the contingent consideration at NZD 5.3 million. In coming to this conclusion, Sky has considered
the current performance of RugbyPass, the uncertainty surrounding the current economic environment given the existence of
COVID-19 and the probability of payment.
28. Related Parties
There were no loans to directors by the Group or associated parties at any of the reporting dates.
Related party transactions include the following:
In NZD 000
Remuneration of key personnel (included in employee costs)
CEO share based remuneration
Directors' fees
Dividends paid to directors and key management personnel
Total related party transactions
30-Jun-20
8,691
386
826
-
9,903
30-Jun-19
14,750
161
636
40
15,587
The first tranche of 200,000 shares of the Chief Executive’s entitlement to 800,000 shares vested in February 2020 at a fair value
of $386,000 (refer note 19).
The Group’s directors and key management personnel collectively had shareholdings of 3,491,032 shares (30 June 2019: 318,243
shares) which carry the normal entitlement to dividends. The increase is the result of acquisitions relating to the Sky's rights issue
(refer note 19). Share transactions undertaken by directors can be found as part of the statutory disclosures on page 98.
84
Notes to the Consolidated Financial Statements (Continued) 29. Commitments
In NZD 000
Lease commitments:
Year 1
Year 2
Year 3
Year 4
Year 5
Later than year 5
Contracts for transmission services:
Year 1
Year 2
Year 3
Year 4
Year 5
Contracts for future programmes:
Year 1
Year 2
Year 3
Year 4
Year 5
Later than five years
Capital expenditure commitments:
Property, plant and equipment
Year 1
Other services commitments:
Year 1
Year 2
Year 3
Year 4
30-Jun-20
30-Jun-19
-
-
-
13,105
22,466
144,159
179,730
1,355
680
680
607
607
3,929
255,100
237,100
184,800
143,100
139,600
55,500
1,015,200
861
861
20,660
10,475
856
43
32,034
35,357
35,763
15,924
1,668
1,532
2,416
92,660
4,757
2,281
-
-
-
7,038
184,958
106,148
33,785
13,593
2,076
1,955
342,515
5,475
5,475
22,494
3,389
535
93
26,511
The prior year commitments include contracts which were previously treated as operating leases which have now been reclassified
to lease liabilities as a result of the adoption of NZ IFRS 16 Leases and have therefore not been included as lease commitments.
Note 3 includes a reconciliation of the prior year operating lease commitments.
Lease commitments relate to the Optus lease contract that has not commenced and which will be recorded as a lease liability
from the commencement date.
The contract with Optus Networks Pty Limited (Optus) to lease transponders on the D1 satellite which was launched in
October 2006 and commissioned in November 2006 for a period of 15 years was previously accounted for as an operating lease.
On 1 July 2019 this lease was classified as a lease liability and a right to use asset (refer notes 13 and 17).
In December 2018 Sky entered into an extension of its satellite service agreement with Optus for a further ten years to 2031. Sky’s
future payments under the agreement are likely to exceed $200 million. The agreement was conditional on Optus procuring the
successful launch of a new satellite to replace the existing D1 satellite. In June 2020, the Group revised the contract with Optus to
allow for a late launch date of the replacement satellite (to be known as O11), greater functionality and flexibility over transponder
capacity for the term of the contract with corresponding potential cost savings.
85
Sky / 2020 Annual Report 30. Contingent Liabilities
The Group has no undrawn letters of credit at 30 June 2020 (30 June 2019: $650,000 relating to Datacom Employer Services for
Sky executive payroll liabilities).
The Group is subject to litigation incidental to their business, none of which is expected to be material. No provision has been made
in the Group's financial statements in relation to its current litigation and the directors believe that such litigation will not have a
significant effect on the Group's financial position, results of operations or cash flows.
31. Subsequent Events
Sale of Outside Broadcasting Limited (OSB)
On 12 August 2020 Sky announced the sale of Outside Broadcasting Limited (OSB) assets to global operator NEP New Zealand
Limited. As part of the transaction NEP New Zealand will be Sky’s technical production partner in New Zealand for the next
ten years. The OSB assets sold will include six HD OB units and all ancillary equipment including leases for two OSB warehouse
facilities. The majority of OSB team members and some Sky broadcast specialists will transition to NEP New Zealand. The
transaction allows Sky to avoid future significant capital investment of around $50 million for broadcast equipment while
continuing to give its customers the best sports viewing experience. Settlement is conditional on the approval of the Commerce
Commission and the Overseas Investment Office.
Bank facility
On 2 July 2020 the Group signed a renegotiated bank facility with a syndicate of banks comprising Bank of New Zealand,
Commonwealth Bank of Australia and Westpac Bank securing a facility of $200 million facility maturing on 31 July 2023
(refer note 16 for further information).
COVID-19
On 12 August 2020 the government announced a move from Level 1 to Level 3 for Auckland and Level 2 for the rest of the country.
This has not resulted in changes to assumptions relating to the Group's key estimates and judgements referred to in these financial
statements.
32. Non-GAAP Financial Information
Sky has used operating profit before impairment, which is a non-GAAP profit measure when discussing financial performance.
The directors and management believe that this measure provides useful information on the underlying performance of the Group.
This is used internally to evaluate performance, analyse trends and allocate resources. Operating profit before impairment does
not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information
presented by other entities.
86
Notes to the Consolidated Financial Statements (Continued) Independent
Auditor’s Report
To the shareholders of Sky Network Television Limited
We have audited the consolidated financial statements which comprise:
• the consolidated balance sheet as at 30 June 2020;
• the consolidated income statement for the year then ended;
• the consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of changes in equity for the year then ended;
• the consolidated statement of cash flows for the year then ended; and
• the notes to the consolidated financial statements, which include significant accounting policies.
Our Opinion
In our opinion, the accompanying consolidated financial statements of Sky Network Television Limited (the Company), including its
subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 30 June 2020, its financial
performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial
Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)) and International
Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for
Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand
Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of providing treasury related financial markets risk analysis and
commentary, agreed upon procedures on the bank compliance certificate, regulatory reporting and scenario analysis of property
requirements. In addition, certain partners and employees of our firm may subscribe to Sky services on normal terms within the
ordinary course of the trading activities of the Group. These relationships and other services have not impaired our independence.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
87
Sky / 2020 Annual Report Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated
financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our audit addressed the key audit matter
Impairment of goodwill, including the impact of COVID-19
The carrying amount of goodwill as at 30 June 2020 amounted
to $256.3 million (2019: $395.3 million). The Group recognised
additional goodwill of $38.5 million during the year in relation
to the acquisition of RugbyPass Limited (RugbyPass). This
increase was offset by an impairment charge recognised of
$177.5 million (2019: $670.0 million) during the year.
Goodwill impairment is an area of focus for the audit due to
the significance of the carrying value on the balance sheet,
the inherent judgement involved in performing the impairment
assessment and the impact of COVID-19 on the assumptions
that the Group's assessment is based on.
At 30 June 2020, the Group considered the recoverable
amount using the Fair Value Less Costs of Disposal (FVLCD)
methodology as being the most appropriate approach to
assess whether or not there is an impairment in the carrying
value of goodwill. The forecasts in the impairment model
prepared by the Group are based on the Group’s strategy, some
elements of which would be excluded under a Value In Use (VIU)
methodology under NZ IAS 36, Impairment of assets. As such,
management has concluded that the FVLCD methodology
results in a higher recoverable amount compared to VIU.
Management has engaged an independent third-party expert
to prepare a valuation report for the two separate cash
generating units (CGUs) identified: Sky and RugbyPass.
The future cash flows in the FVLCD models were prepared
based on the Board approved five year forecast cash flows.
The key assumptions used in the impairment models are the
following:
• residential satellite and streaming revenues (including
subscriber numbers and average revenue per user (ARPU));
• broadband revenues;
• programming expenses;
• broadcasting and infrastructure expenses;
• capital expenditure;
• discount rates; and
• terminal growth rates.
Reasonably possible changes in key assumptions that could
result in an impairment are disclosed in note 15 to the
consolidated financial statements.
We obtained the valuation report prepared by management’s
third-party expert and held discussions with them and
management to understand the assumptions used in
the goodwill impairment assessment. We gained an
understanding of the current and forecast outlook for the
industry and the strategic direction of the business relevant
to the analysis performed on goodwill impairment and
considered management’s assessment of FVLCD based on
market capitalisation at balance date.
We then performed the following audit procedures:
• Assessed the appropriateness of the separation of the Sky
and RugbyPass CGUs into separate CGUs and considered
the basis of allocation of goodwill across the Sky and
RugbyPass CGUs;
• Assessed the appropriateness of using a FVLCD approach
against NZ IAS 36;
• Checked the calculation of the valuation models including
the mathematical accuracy and compared the resulting
balances to the relevant carrying values of each CGU;
• Engaged our own valuation expert to assist us to:
• understand the valuation methodology applied by
management’s third-party expert in preparing the
valuation models;
• assess the economic and industry forecasts, cost of
capital and other inputs to comparable organisations in
relation to discount rates and terminal growth rates;
• challenge the rate used for cost of disposal by comparing
it to external evidence; and
• challenge management’s expert and management
on the reasonableness of key cash flow assumptions,
including movements in subscriber numbers, ARPU and
programming costs, as well as the impact of COVID-19
on these assumptions.
• Considered the appropriateness of changes in key
assumptions from the previous year by performing a
lookback procedure against the actual FY20 results,
understanding the key elements of the forecast cash flows
approved by the Board versus the prior year and considered
the impact on our assessment of forecast cash flows;
• Obtained and evaluated management’s third-party expert’s
sensitivity analyses to ascertain the impact of reasonably
possible changes and also considered alternative possible
scenarios, including the effect of COVID-19; and
• Considered the appropriateness of the disclosures in note
15 to the consolidated financial statements against the
requirements of the accounting standards.
88
Independent Auditor's Report (Continued) Key Audit Matter
How our audit addressed the key audit matter
Capital structure and funding considerations,
including the impact of COVID-19
For the year ended 30 June 2020, the Group continued to
execute its growth strategy which included the completion of
the RugbyPass and Lightbox business acquisitions, retention of
key programming contracts and change in the organisational
design and structure of the Group.
As a result of COVID-19, the Group took steps to manage
liquidity. This included renegotiating the bank facility with
a syndicate of banks and raising additional capital through
a rights issue. The Group had no outstanding bank borrowings
and has an undrawn facility balance of $200 million as at
30 June 2020.
The Group concluded that the capital raise and renegotiated
bank facility terms will enable the Group to have access to
sufficient capital to repay the bonds in March 2021.
This was an area of audit focus due to the impact of funding
on compliance with banking financial covenants, going concern
considerations and the significance of the capital raise
transaction to the Group.
Notes 3 and 16 of the consolidated financial statements include
disclosures on the Group’s capital structure and borrowings,
respectively.
Accounting for business acquisitions
The Group acquired the assets and liabilities of RugbyPass
in August 2019 for $45.3 million, comprising cash of $15.6
million, $24.4 million of shares and $5.3 million as contingent
consideration.
In January 2020, the Group also acquired Lightbox for a total
cash consideration of $13.5 million.
This was a key audit matter due to the complexities in
identifying and valuing the assets and liabilities acquired
and the significant judgement in relation to the contingent
consideration recognised. Intangible assets recognised in
relation to the two acquisitions amount to $16.0 million.
Management engaged an independent expert to assist in the
purchase price allocation exercise of these acquisitions.
Refer to note 27 in the consolidated financial statements for
disclosures on these business acquisitions.
We performed the following audit procedures to respond
to the assessed audit risk arising from the Group’s capital
structure and future funding requirements:
• Updated our understanding of the Group’s strategy,
including its response to COVID-19 impacts to the business;
• Updated our understanding of the relevant banking
agreements, financial covenants and any conditions included
in the bank facility agreement that may result in a change in
the financial ratios and performed the following procedures:
• reperformed the compliance with financial covenants
calculations for the past year;
• reperformed the calculations for the forecast financial
covenants and compared the inputs to the calculations
to the Board approved budget for the year ending 30
June 2021;
• performed sensitivity analysis to assess the level of
forecasting risk and the COVID-19 impacts incorporated
into the forecast assumptions; and
• considered the Group’s ability to settle its obligations as
they fall due for at least 12 months from the date the
consolidated financial statements are signed, including
the bond due in March 2021, given the ongoing working
capital requirements and capital expenditure required to
support the strategy.
• Obtained an understanding of the background of the capital
raising activity through discussions with management and
the Directors, including performing the following specific to
the transaction:
• validated receipt of the capital raise proceeds and
agreed the issue of equity securities to the Company’s
share register (managed by a third party) and the NZ
Companies Office; and
• tested, on a sample basis, that transaction costs
recorded in equity were directly attributable to the
capital raise and that it was appropriate to deduct these
costs from equity.
• Reviewed the disclosures in the consolidated financial
statements for compliance with accounting standards.
We performed the following audit procedures:
• obtained an understanding of the acquisitions by reading
the relevant contractual agreements and documents;
• obtained the valuations undertaken by management’s
expert to determine the purchase price allocations and
tested the mathematical accuracy of the models; and
• used our own valuation expert to assist us in challenging
and evaluating the valuation methodology to measure the
assets and liabilities acquired and the significant judgement
in valuing the contingent consideration; and
• considered the appropriateness of the disclosures in the
consolidated financial statements against the accounting
standards.
89
Sky / 2020 Annual Report Our Audit Approach
Overview
An audit is designed to obtain reasonable assurance whether the consolidated financial statements are
free from material misstatement.
Overall Group materiality: $4.4 million, which represents approximately 2.5% of earnings before interest,
depreciation and amortisation (EBITDA) adjusted for goodwill impairment and redundancy costs.
Given the volatility in profit before income tax over recent years and the Group currently executing its
growth strategy, in our judgement, adjusted EBITDA provides an appropriate benchmark for calculating
materiality.
As reported above, we have three key audit matters, being:
• Impairment of goodwill, including the impact of COVID-19
• Capital structure and funding considerations, including the impact of COVID-19
• Accounting for business acquisitions
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group
materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative considerations,
helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements, both individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial statements and our
application of materiality. As in all of our audits, we also addressed the risk of management override of internal controls including
among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due
to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the
industry in which the Group operates.
Information other than the Consolidated
Financial Statements and Auditor’s Report
The Directors are responsible for the annual report. Our opinion on the consolidated financial statements does not cover the other
information included in the annual report and we do not express any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the
other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the
Consolidated Financial Statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated financial
statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
90
Independent Auditor's Report (Continued) Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these consolidated financial statements.
As part of an audit in accordance with ISAs (NZ), the auditor exercises professional judgement and maintains professional
scepticism throughout the audit.
The auditor also:
• Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence that is sufficient and
appropriate to provide a basis for the auditor’s opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Concludes on the appropriateness of the use of the going concern basis of accounting by those charged with governance and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If the auditor concludes that a material uncertainty
exists, the auditor is required to draw attention in the auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify the auditor’s opinion. The auditor’s conclusions are based on the
audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
• Evaluates the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
• Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. The auditor is responsible for the direction, supervision
and performance of the group audit. The auditor remains solely responsible for the audit opinion.
The auditor communicates with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that the auditor identifies during the audit.
The auditor also provides those charged with governance with a statement that the auditor has complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on the auditor’s independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, the auditor determines those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. The
auditor describes these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, the auditor determines that a matter should not be communicated in the auditor’s report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might
state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders,
as a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Keren Blakey.
For and on behalf of:
Chartered Accountants
9 September 2020
Auckland
91
Sky / 2020 Annual Report
92
Other
Information
Corporate Governance ......................................................................... 94
Interests Register .......................................................................................96
Company and Bondholder Information ................................. 98
Waivers and Information .................................................................106
Share Market and Other Information ..................................107
Directory .........................................................................................................108
93
Sky / 2020 Annual Report Corporate Governance
Sky’s Board is committed to fulfilling its corporate governance obligations and maintaining high ethical standards. The Board
regularly reviews Sky’s corporate governance framework to ensure it is consistent with best practice.
This section of our annual report includes key information about Sky’s corporate governance policies and practices. You will find
a more detailed corporate governance statement online at sky.co.nz/investor-relations/corporate-governance which provides
further information covering all of the required disclosures under the ASX Corporate Governance Principles and Recommendations
(ASX Recommendations) and the NZX Corporate Governance Code (NZX Code). The corporate governance statement has been
approved by the Board.
Board Of Directors
Diversity
Committees
The Board operates two permanent board committees,
namely the Audit and Risk Committee and the People and
Performance Committee (formerly, the Nomination and
Remuneration Committee). The members of the Audit and
Risk Committee are Keith Smith (Chair), Susan Paterson,
Joan Withers and Derek Handley. The members of the People
and Performance Committee are Susan Paterson (Chair),
Joan Withers and Derek Handley.
Independent and
Executive Directors
At 30 June 2020 all of the directors of Sky other than Martin
Stewart were considered to be independent directors. Martin
Stewart is currently the only executive director on the Board,
and is not considered independent as he is also Sky’s Chief
Executive. All directors other than Martin Stewart are considered
independent because they do not have any “Disqualifying
Relationship” (as defined by the NZX Listing Rules), and
none of the factors in NZX Recommendation 2.4 or ASX
Recommendation 2.3 apply to materially diminish independence.
94
Diversity of gender, skill, age, ethnicity, experience and beliefs
are valued by Sky. Sky recognises the value of diversity and the
organisational strength, problem solving ability and innovative
approach that it brings. The provision of equal opportunities
for all employees is fundamental to the way in which Sky
functions as a business.
Sky’s Diversity Policy reflects a continuing commitment to
diversity and inclusion, and is available at sky.co.nz/investor-
relations/corporate-governance.
The Board acknowledges the importance of gender diversity
both on boards and within companies, and as noted in Sky’s
Diversity Policy, this is one of the diversity characteristics that
is considered when evaluating new director candidates.
Gender Diversity for FY20
As at 30 June 2020, Sky’s Board had three female directors
and five male directors (compared to two female directors
and four male directors as at 30 June 2019).
Sky’s officers (being a person who is concerned or takes part
in the management of Sky and reports to the Board, or to a
person who reports to the Board) include two female officers
and seven male officers. Sky takes an holistic approach to
diversity. Sky’s measurable objectives for achieving diversity
are that:
• Each year the Board actively considers the composition of
the Board and any opportunities for new directors to join
the Board with diversity (including gender diversity) being
one of the key criteria when considering new appointments.
• Each year the Board compares the number of female and
male employees at Sky to the previous financial year’s
figures to ensure that Sky is maintaining a strong level of
female participation at all levels of the organisation.
• Each year the Board considers the extent of age
diversification at Sky by comparing the number of
employees aged over and under 45 years to the previous
financial year’s figures, in order to ensure Sky is benefiting
from a mix of experience and new ways of thinking.
For the year ended 30 June 2020, the Board is satisfied
that Sky achieved its gender diversity objectives and other
measurable diversity objectives as follows:
• The Board considered opportunities for new directors to
join the Board with diversity (including gender diversity)
in mind for new appointments.
• Sky maintained consistent levels of gender and age
diversification amongst its Board members, officers and
employees across the organisation.
The chart below represents Sky’s gender and age diversification as at 30 June 2020:
Board Level
No of Women: 3
Total Number: 8
2019
No of Women: 2
Total Number: 6
Over 45 - 88%
(2019 - 83%)1
Officers
No of Women: 2
Total Number: 9
2019
No of Women: 2
Total Number: 9
Over 45 - 89%
(2019 - 89%)
All Staff
No of Women: 427
Total Number: 992
2019
No of Women: 512
Total Number: 1,137
Over 45 - 36%
(2019 - 36%)
(1) The percentage of the Board over 45 was incorrectly reported as 100% in the 2019 Annual Report.
The table below provides a detailed breakdown of the age diversification of Sky’s workforce:
Age
20 - 30
30 - 40
40 - 50
50 - 60
60 - 70
70 - 80
2020
21%
31%
28%
15%
4%
1%
2019
17%
32%
29%
16%
5%
1%
Risk Management
Sky’s risk framework is overseen and monitored by both the
Board and the Audit and Risk Committee. Sky maintains a
risk register and the Audit and Risk Committee, in conjunction
with management, regularly report to the Board on the
effectiveness of the management of Sky’s business risks
and whether the risk management framework and systems
of internal compliance and control are operating efficiently
and effectively in all material respects.
Sky has a Controlling and Managing Risk Policy which
provides an overview of its risk management process.
The policy outlines Sky’s strategic risk management
objectives and guidelines and provides a framework to
identify, manage and report on risks, both financial and
non-financial. The Audit and Risk Committee reviews the
Controlling and Managing Risk Policy annually. The Audit and
Risk Committee reviewed Sky’s risk management framework
during the reporting period to 30 June 2020 and is satisfied
that Sky has in place a robust risk assessment process.
Sky’s internal audit function is contracted out to an
independent third party. An annual internal audit plan is
presented and approved by the Audit and Risk Committee
and the Audit and Risk Committee receives internal audit
reports during the year and monitors completion of action
items that arise.
Material exposure to economic,
environmental and social
sustainability risks
Sky identifies and assesses material exposure to economic,
environmental and social sustainability risks on an annual
basis. A summary of Sky’s risk management framework, the
key economic, environmental and social sustainability risks it
faces, and how Sky intends to manage those risks is included
in the Controlling and Managing Risk Policy on Sky’s website
(at www.sky.co.nz/investor-relations/corporate-governance).
Principal risks that could affect results and performance include:
• Regulatory environment;
• Competition;
• Programming rights;
• Content protection;
• Business disruption;
• Investment strategy – Adoption of new technology;
• Financial risks;
• Reputational risks and brand perception; and
• Business transformation.
95
Sky / 2020 Annual Report Interests Register
Disclosures of Interest – General Notices
Directors have given general notices disclosing interests in various entities pursuant to section 140(2) of the Companies Act 1993.
Those notices which remain current as at 30 June 2020 are as follows:
Director
Entity
Philip Bowman1
Mike Darcey
Derek Handley
Geraldine McBride
Better Capital PCC Limited
Kathmandu Holdings Limited (Listed)
Tegel Group Holdings Limited
Ferrovial SA (Listed)
Majid al Futtaim Holding LLC
Majid al Futtaim Properties LLC
Majid al Futtaim Capital LLC
Atropos SCI
Tom Tom Holdings, Inc.
Vinula Pty. Limited
Vinula Super Fund Pty. Limited
M247
Arqiva Group Limited
British Gymnastics
Aera Limited
Aera Foundation
Aera VC Management Limited
My Wave Holdings Limited
My Wave Limited
Fisher & Paykel Healthcare Corporation Limited
National Australia Bank Limited
Susan Paterson ONZM Reserve Bank of New Zealand1
Theta Systems Limited
Les Mills Holdings Limited
Goodman (NZ) Limited and associated companies
Arvida Group Limited
Steel and Tube Holdings Limited
The Electricity Authority
Institute of Directors Auckland Branch
EROAD Limited
New Zealand Golf2
The Home of Cycling Charitable Trust2
Anderson & O’Leary Limited and associated companies
Enterprise Group Holdings Limited and associated companies
Goodman (NZ) Limited and associated companies
H J Asmuss & Co Limited and associated companies
Healthcare Holdings Limited and associated companies
Mercury NZ Limited
Mobile Surgical Services Limited
The Warehouse Group Limited and associated companies
Tree Scape Limited
Gwendoline Holdings Limited (non-trading)
The Warehouse Group Limited
ANZ Bank New Zealand Limited
Louise Perkins Foundation
N/A
Keith Smith1
Joan Withers1
Martin Stewart
(1) Entries added by notices given by the directors during the year ended 30 June 2020.
(2) Entries removed by notices given by the directors during the year ended 30 June 2020.
96
Relationship
Director
Director
Chair
Director
Director
Chair
Director
Président Directeur Générale
Director
Director
Director
Chair
Director
Chair
Director
Trustee
Director
Director, CEO
Director
Director
Director
Director
Chair, Director
Director
Director
Director
Chair, Director
Board Member
Member
Director
Director (Retired)
Chair (Retired)
Chair
Chair
Chair
Chair
Chair
Director
Chair
Director
Director
Director
Chair
Director
Trustee
Disclosures of Interest
– Particular Transactions/Use of Company Information
During the year to 30 June 2020, in relation to Sky:
• Susan Paterson (Director) made one disclosure on 23 June
2020 regarding a beneficial interest in the acquisition of
33,960 ordinary shares by herself and Richard Taylor jointly
as trustees of the SM Taylor Family Trust.
• no specific disclosures were made in the Interests Register
under section 140(1) of the Companies Act 1993; and
• no entries were made in the Interests Register as to the
use of company information under section 145(3) of the
Companies Act 1993.
Disclosures of Relevant Interests in Securities
During the year to 30 June 2020, the following disclosures
were made in the Interests Register in relation to Sky’s
directors and senior managers acquiring a relevant interest
in Sky’s shares under section 148 of the Companies Act 1993
and under the Financial Markets Conduct Act 2013:
• Geraldine McBride (Director) made two disclosures during
the 2020 financial year:
• on 29 August 2019 regarding an acquisition of 23,016
ordinary shares in Sky; and
• on 23 June 2020 regarding an indirect interest in the
acquisition of 65,135 ordinary shares in Sky by Wongaling
Pty Limited.
• Martin Stewart (Director and CEO) made three disclosures
during the 2020 financial year:
• on 21 February 2020 regarding the vesting of 200,000
ordinary shares as part of a contractual entitlement to receive
a total of 800,000 ordinary shares in instalments of 200,000
on each of the first four anniversaries of commencement of
employment, with the shares vesting if Sky exercises its no
fault termination right or if there is a change of control and
Mr Stewart is no longer Chief Executive;
• Sophie Moloney (Chief Commercial Officer) made one
disclosure on 8 June 2020 regarding the acquisition of
908,333 ordinary shares in Sky.
• Blair Woodbury (Chief Financial Officer) made one
disclosure on 8 June 2020 regarding the acquisition of
208,333 ordinary shares in Sky.
Insurance and Indemnities
Sky has in place directors’ and officers’ liability insurance to
cover risks normally covered by such policies arising out of acts
or omissions of Sky directors or employees in that capacity.
In addition, Sky put in place additional insurance in respect of
directors’ liability that may arise as a result of the capital raise
which was announced to the market on 21 May 2020.
Sky has entered into a deed of indemnity pursuant to which
it has agreed to indemnify directors, senior management and
officers of Sky against liability incurred from acts or omissions
of such directors, senior management or officers, subject to
certain exceptions, which are normal in such indemnities.
Sky Subsidiaries’
Interests Registers
The directors of Sky’s subsidiaries have given notices disclosing
interests in various entities pursuant to section 140 of the
Companies Act 1993. Those notices which remain current as
at 30 June 2020 are set out below:1
• on 5 June 2020 regarding the acquisition of 270,000
ordinary shares in Sky; and
• Screen Enterprises Limited: Martin Stewart has given a general
notice disclosing interests arising from being an employee of Sky.
• on 23 June 2020 regarding the acquisition of 566,000
• Sky DMX Music Limited: Martin Stewart and Chaz Savage
ordinary shares in Sky.
• Keith Smith (Director) made four disclosures during the
2020 financial year:
• an initial disclosure notice on 28 April 2020 regarding his
beneficial interest in 20,901 ordinary shares in Sky by
Gwendoline Holdings Limited;
• on 5 June 2020 regarding his indirect interest in the
acquisition of 30,000 ordinary shares in Sky by Lily Wong;
• on 15 June 2020 regarding his indirect interest in the
acquisition of a further 30,000 ordinary shares in Sky by
Lily Wong; and
• on 23 June 2020 regarding his interest in the acquisitions
of 59,149 ordinary shares in Sky by Gwendoline Holdings
Limited, and 55,468 ordinary shares in Sky jointly acquired
by Keith and his brother Robert Smith.
• Philip Bowman (Director and Chair) made one disclosure on
5 June 2020 regarding the acquisition of 500,000 ordinary
shares in Sky.
• Mike Darcey (Director) made one disclosure on 8 June 2020
regarding the acquisition of 1,500,000 ordinary shares in Sky.
• Derek Handley (Director) made one disclosure on 23 June 2020
regarding the acquisition of 13,584 ordinary shares in Sky.
have each given a general disclosure notice disclosing
interests arising from being senior employees of Sky and,
in Martin Stewart’s case, a shareholder of Sky.
• Believe It Or Not Limited: Chaz Savage has given notice
disclosing interests arising from being an employee of SKY.
Brendan Lochead has given a general notice disclosing his
interest arising from being a shareholder of Believe It Or
Not Limited and a director and shareholder of Mad If You
Don’t Limited. Annabelle Lochead has given a general notice
disclosing her interest arising from being the wife of Brendan
Lochead (who is a shareholder of Believe It Or Not Limited)
and a director and shareholder of Mad If You Don’t Limited.
• Lightbox New Zealand Limited: Martin Stewart has given
a general notice disclosing interests arising from being an
employee of Sky.
• Sky Investment Holdings Limited: Martin Stewart, Sophie
Moloney and Blair Woodbury have each given a general
disclosure notice disclosing interests arising from being
senior employees and shareholders of Sky.
(1) Grant McKenzie retired as a director of Sky DMX Music Limited
and Believe it Or Not Limited on 16 December 2019. Martin Wrigley
retired as a director of Sky DMX Music Limited on 16 December
2019. George McFarlane retired as a director of Screen Enterprises
Limited on 8 November 2019. Mr McKenzie, Mr Wrigley and Mr
McFarlane had each disclosed interests arising as employees of Sky.
97
Sky / 2020 Annual Report Company and
Bondholder Information
Directors Holding and Ceasing Office
• Philip Bowman (Chair) (appointed 1 September 2019)
• Peter Macourt (ceased 17 October 2019)
• Martin Stewart
• Mike Darcey
• Derek Handley
• Geraldine McBride
• Susan Paterson, ONZM1
• Joan Withers (appointed 17 September 2019)
• Keith Smith (appointed 21 April 2020)
Statement of Directors’ Interests
For the purposes of NZX Listing Rule 3.7.1(d), the following table sets out the quoted financial products in which each director had
a relevant interest as at 30 June 2020:
Relevant interests
Philip Bowman
Mike Darcey
Derek Handley
Geraldine McBride
Susan Paterson
Keith Smith2
Martin Stewart
Joan Withers
Shares
500,000
1,500,000
17,584
88,151
43,960
215,118
1,036,000
600,0003
Nil
(1) Susan Paterson will conclude her current term on the Sky Board in October and has chosen not to seek re-election at the forthcoming Annual
General Meeting.
(2) 75,068 shares jointly held by Keith and his brother Robert Smith; 80,050 held by Gwendoline Holdings Limited to which Keith is a discretionary
beneficiary of a trust which owns Gwendoline Holdings Limited; and 60,000 held by Keith’s partner Lily Wong.
(3) Power to control the acquisition/disposal of 600,000 ordinary shares as a result of a contractual entitlement to receive such shares in instalments of
200,000 on each of the next three anniversaries of commencement of employment, with the shares vesting if Sky exercises its no fault termination
right or if there is a change of control and Mr Stewart is no longer Chief Executive.
98
Company and Bondholder Information (Continued) Subsidiaries
At 30 June 2020, Sky had the following subsidiary companies:
Subsidiary
Believe It Or Not Limited
Director(s)
Anabelle Lochead
Brendan Lochead
Grant McKenzie (retired 16 December 2019)
Christopher Shaw
Chaz Savage (appointed 16 December 2019)
Igloo Limited
Martin Stewart
Lightbox New Zealand Limited
(acquired 31 January 2020)
Martin Stewart (appointed 31 January 2020)
Matthew Bain (retired 31 January 2020)
Stefan Knight (retired 21 January 2020)
David Chalmers (retired 20 December 2020)
Business during FY20
Quizzes for the hotel
entertainment industry.
Did not trade.
Streaming services
within New Zealand.
Media Finance Limited
Martin Stewart
Did not trade.
Outside Broadcasting Limited
Martin Stewart
Mobile on-site broadcasting
facilities and services.
Screen Enterprises Limited
George MacFarlane (retired 8 November 2019)
Did not trade.
Sky DMX Music Limited
Grant McKenzie (retired 16 December 2019)
Martin Stewart (appointed 8 November 2019)
Martin Wrigley (retired 16 December 2019)
Steven Hughes
Kenneth Eissing Jr (retired 16 August 2019)
David Hoodis (appointed 25 September 2019)
Chaz Savage (appointed 16 December 2019)
Martin Stewart (appointed 16 December 2019)
Martin Stewart (appointed 15 August 2019)
Sophie Moloney (appointed 15 August 2019)
Blair Woodbury (appointed 15 August 2019)
Sky Investment Holdings Limited
(incorporated 15 August 2019)
Operates the Sky
DMX music business.
Investment in the form of
acquisition of Rugby Pass Limited
(Ireland) and Rugby Pass Asia Pte
Limited (Singapore).
Sky Ventures Limited
(previously Cricket Max Limited)
Martin Stewart
Did not trade.
Rugby Pass Asia Pte (Singapore)
Tang Edmund Koon Kay
Management service.
Timothy Martin (retired 27 July 2020)
Rugby Pass Limited (Ireland)
Timothy Martin
Neil Martin
International streaming
service.
The remuneration of Sky’s employees acting as directors of subsidiary companies is disclosed in the relevant banding for employee
remuneration or, in the case of Martin Stewart, his remuneration is disclosed below under the heading of “Chief Executive
Remuneration”.
No director of any subsidiary company received directors’ fees or extra benefits by virtue of the fact that they are acting as
directors of subsidiary companies.
99
Sky / 2020 Annual Report Remuneration of Directors
The total remuneration and value of other benefits received by directors of Sky during the year 1 July 2019 to 30 June 2020
was as follows:
Name
Martin Stewart2
Derek Handley
Peter Macourt
(ceased 17 October 2019)
Geraldine McBride
Susan Paterson
Mike Darcey
Philip Bowman
(appointed 1 September 2019)
Joan Withers
(appointed 17 September 2019)
Keith Smith
(appointed 21 April 2020)
Totals
Board Fees
Audit and Risk
Committee
-
-
100,000
12,000
People and
Performance
Committee
-
5,000
1,493
-
3,584
-
16,665
12,000
-
-
-
-
Other1
Total
Remuneration
-
-
-
-
-
-
-
117,000
55,844
100,000
128,665
100,000
15,000
181,667
50,767
100,000
100,000
100,000
166,667
79,167
8,333
2,084
15,000
104,583
19,166
715,767
3,833
44,415
-
20,577
15,000
45,000
38,000
825,759
(1) Remuneration categorised “Other” comprises fees paid for the relevant directors’ participation in the due diligence committee
for the capital raise which was announced to the market on 21 May 2020.
(2) Martin Stewart did not receive any remuneration for the performance of his duties as a director during the year to 30 June
2020. His remuneration for the performance of his duties as CEO is set out below.
The directors’ fee pool has been set at a maximum amount of $950,000 per annum since October 2015. The current fees
paid to Sky directors are set out in the table above. Directors do not receive any performance or equity-based remuneration
or superannuation or retirement benefits (for their role as directors). This reflects the role of the directors which is to provide
oversight and guide strategy, whereas the role of management is to operate the business and execute Sky’s strategy.
Chief Executive Remuneration
The CEO remuneration is a mix of base salary, short-term incentive (STI) and share entitlements, and is benchmarked against the
market annually.
The CEO’s remuneration for the year ending 30 June 2020 and for the period 21 February 2019 to 30 June 20193 was:
Base salary
STI
Total remuneration
2020
1,500,000
-
1,500,0005
2019
625,000
312,5004
937,500
(3) Martin Stewart was appointed as CEO of Sky on 21 February 2019. CEO remuneration for the full year ending 30 June 2019 is
reported in Sky’s 2019 Annual Report.
(4) The CEO’s remuneration for FY19 included an STI entitlement of $312,500, which was paid during FY20 but for accounting
purposes is treated as accruing during FY19.
(5) In addition to cash remuneration, the CEO’s FY20 remuneration included 200,000 ordinary shares in Sky Network Television
Limited issued as part of the remuneration arrangements in the CEO’s employment agreement and notified to the market
on 21st February 2020. The value of the shares as at the date of issue was $65,800 (at $0.329 per share).
The CEO is entitled to participate in an STI scheme based on 50% of the CEO’s base salary. The STI framework and specific
metrics are considered by the People and Performance Committee and recommended to the Board for approval on an annual
basis. The Board is extremely cognisant of the requirement to ensure that any STI is aligned to shareholder interests. While an
STI was proposed for FY20 for the CEO and senior leadership team, as a result of COVID-19, the CEO agreed with the Board
and senior management that no STI bonus would be payable for the 2020 financial year.
100
Company and Bondholder Information (Continued)
Shareholders
Substantial Product Holders
According to notices given to Sky under the Financial Markets Conduct Act 2013 the following persons were substantial product
holders in Sky as at 30 June 2020 and 31 July 2020 (as indicated below):
Entity
Jupiter Asset Management Limited and its related bodies corporate
Accident Compensation Corporation
UBS Group AG and its related bodies corporate
Black Crane Asia Pacific Opportunities Fund
Mitsubishi UFJ Financial Group, Inc., First Sentier Investors
(Australia) IM Ltd, First Sentier Investors Realindex Pty. Limited
Kiltearn Partners LLP and The Kiltearn Global Equity Fund1
Entity
Jupiter Asset Management Limited and its related bodies corporate
Accident Compensation Corporation
Kiltearn Partners LLP and The Kiltearn Global Equity Fund1
UBS Group AG and its related bodies corporate
Black Crane Asia Pacific Opportunities Fund
Mitsubishi UFJ Financial Group, Inc., First Sentier Investors
(Australia) IM Ltd, First Sentier Investors Realindex Pty. Limited
SKT: Voting Securities
as at 30 June 2020
154,729,719
134,665,936
93,369,859
89,496,785
82,208,566
34,939,993
SKT: Voting Securities
as at 31 July 2020
154,729,719
134,665,936
122,095,343
93,369,859
89,496,785
82,208,566
(1) Prior to 30 June 2020, the last substantial product holder notice provided by Kiltearn Partners LLP and The Kiltearn Global Equity Fund was
released on 30 April 2020, prior to the issuance of shares under the capital raising announced by Sky on 21 May 2020, and therefore the figures
shown as at 30 June 2020 are prior to the allotment of any shares to Kiltearn Partners LLP and The Kiltearn Global Equity Fund. A further notice
was released on 2 July 2020, showing the interests held by Kiltearn Partners LLP and The Kiltearn Global Equity Fund after the allotment of shares
under the capital raising.
The total number of issued voting securities of Sky as at 30 June 2020 and 31 July 2020 was 1,746,279,558.
101
Sky / 2020 Annual Report
Twenty Largest Shareholders as at 31 July 2020
Name
HSBC Nominees (New Zealand) Limited
JPMorgan Chase Bank NA NZ Branch
Accident Compensation Corporation
New Zealand Depository Nominee Limited
HSBC Nominees (New Zealand) Limited A/C State Street
Citibank Nominees (New Zealand) Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees (NZ) Limited
BNP Paribas Nominees (NZ) Limited
National Nominees Limited
RugbyPass Investors LLC
JBWere (NZ) Nominees Limited
New Zealand Rugby Union Incorporated
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited
Forsyth Barr Limited
Leveraged Equities Finance Limited
Citicorp Nominees Pty Limited
ANZ Wholesale Australasian Share Fund
Forsyth Barr Limited
BNP Paribas Nominees Pty Ltd
Twenty Largest Bondholders as at 31 July 2020
Name
FNZ Custodians Limited
Investment Custodial Services Limited
JBWere (NZ) Nominees Limited
Citibank Nominees (New Zealand) Limited
Custodial Services Limited
Masfen Securities Limited
Custodial Services Limited
Custodial Services Limited
FNZ Custodians Limited
ANZ Custodial Services New Zealand Limited
Forsyth Barr Custodians Limited
Custodial Services Limited
Custodial Services Limited
Tappenden Holdings Limited
Investment Custodial Services Limited
Investment Custodial Services Limited
Zhenji Rong & Yizhen Wu
Investment Custodial Services Limited
JML Capital Limited
University Of Otago Foundation Trust
102
Holding
297,370,877
222,318,616
149,973,898
99,937,934
87,165,841
79,144,350
69,024,686
33,380,773
27,973,315
25,724,896
25,085,408
23,717,377
21,801,325
16,666,666
15,575,879
12,235,778
11,689,272
9,627,585
8,540,842
8,258,099
Holding
15,016,000
10,138,000
5,416,000
5,392,000
3,755,000
3,430,000
2,546,000
2,537,000
1,486,000
1,449,000
1,424,000
1,300,000
1,239,000
1,000,000
965,000
600,000
572,000
500,000
500,000
500,000
Percentage
(2 d.p.)
17.03
12.73
8.59
5.72
4.99
4.53
3.95
1.91
1.60
1.47
1.44
1.36
1.25
0.95
0.89
0.70
0.67
0.55
0.49
0.47
Percentage
(2 d.p.)
15.02
10.14
5.42
5.39
3.76
3.43
2.55
2.54
1.49
1.45
1.42
1.30
1.24
1.00
0.97
0.60
0.57
0.50
0.50
0.50
Company and Bondholder Information (Continued) Distribution of Ordinary Shares and Shareholdings as at 31 July 2020
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
No. of
shareholders
Percentage
(to 2 d.p.)
1,952
2,777
1,360
3,162
912
19.24
27.37
13.40
31.16
8.99
No. of
shares
1,101,680
7,911,384
10,552,038
116,731,346
1,609,983,110
10,163
100.16
1,746,279,558
Percentage
(to 2 d.p.)
0.06
0.45
0.60
6.68
92.20
100.00
Non-Marketable Parcels of Shares
As at 31 July 2020, 4,169 shareholders in Sky had non-marketable parcels of shares for the purposes of ASX Listing Rule 4.10.8.
Other Information
For the purposes of ASX Listing Rule 4.10.14 and 4.10.18, as at 31 July 2020:
• Sky had a total of 46,886,733 ordinary shares deemed securities subject to voluntary escrow on issue, as disclosed to the market
in Substantial Product Holder notices dated 19 August 2019 and 1 November 2019; and
• There was no on-market buy back.
For the purposes of ASX Listing Rule 4.10.16, as at 31 July 2020 Sky had a total of 600,000 unquoted equity securities on issue, held
by one holder.1
Voting Rights Attached to Shares
Each share entitles the holder to one vote.
Distribution of Bonds and Bondholdings as at 31 July 2020
SKT020 Bonds
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
No. of
bondholders
Percentage
(to 2 d.p.)
-
123
231
678
89
0.00
10.93
20.53
60.27
7.91
No. of
bonds
-
615,000
2,228,000
24,259,000
72,898,000
1,125
100.00
100,000,000
Percentage
(to 2 d.p.)
0.00
0.62
2.23
24.26
72.90
100.00
Voting Rights Attached to Bonds
Each bondholder is entitled to one vote for every dollar of principal outstanding on their bonds at meetings of bondholders.
Bondholders do not have the right to attend or vote at shareholders’ meetings.
(1) See the explanatory note in relation to the 600,000 share rights held by Martin Stewart, in the Statement Of Directors’ Interests section above.
103
Sky / 2020 Annual Report Employee Remuneration
The number of employees or former employees of Sky and its subsidiaries (excluding directors of Sky but including employees
of Sky holding office as directors of subsidiaries, other than the Chief Executive1) whose remuneration and benefits were within
specified bands for the year to 30 June 2020 is as follows:
These figures include severance payments made during the financial year.
Remuneration $
100,000 – 110,000
110,001 – 120,000
120,001 – 130,000
130,001 – 140,000
140,001 – 150,000
150,001 – 160,000
160,001 – 170,000
170,001 – 180,000
180,001 – 190,000
190,001 – 200,000
200,001 – 210,000
210,001 – 220,000
220,001 – 230,000
230,001 – 240,000
240,001 – 250,000
260,001 – 270,000
270,001 – 280,000
280,001 – 290,000
300,001 – 310,000
320,001 – 330,000
330,001 – 340,000
380,001 – 390,000
440,001 – 450,000
460,001 – 470,000
490,001 – 500,000
510,001 – 520,000
550,001 – 560,000
580,001 – 590,000
No. of employees
59
56
36
28
26
14
14
8
6
11
3
4
5
2
6
1
3
2
1
1
1
1
3
1
1
2
2
1
(1) The remuneration of Sky’s Chief Executive Martin Stewart is not included in the above table as he is also a director of Sky. His remuneration is
disclosed under the heading “Chief Executive Remuneration” above.
104
Company and Bondholder Information (Continued) Donations
During the year 1 July 2019 to 30 June 2020, Sky made cash donations totalling $302,000. Sky’s subsidiaries did not make any
donations.
Auditors
The auditors of Sky and its subsidiaries were PricewaterhouseCoopers. The amount paid to PricewaterhouseCoopers by Sky in the
year to 30 June 2020 for statutory audit services and for other assurance services was:
Sky
649
77
Statutory audit services ($000)
Other assurance services ($000)
Sky’s subsidiaries did not pay PricewaterhouseCoopers any fees.
105
Sky / 2020 Annual Report Waivers and Information
Current and Ongoing Waivers
and Confirmations
Admission to the official list of the
Australian Securities Exchange
The following is a summary of all waivers granted in favour of
Sky and confirmations which were relied upon by Sky in the
year to 30 June 2020. These were:
1. A waiver to permit Sky to lodge its half yearly and final
reports in the form of an NZX Appendix 1 instead of an ASX
Appendix 4D and ASX Appendix 4E, on the condition that
Sky provides any additional information required by the ASX
Appendices as an annexure to the NZX Appendix 1.
2. A waiver from ASX Listing Rule 6.10.3 to the extent
necessary to permit Sky to set the “specified time” to
determine whether a security holder is entitled to vote at a
shareholders’ meeting in accordance with the requirements
of relevant New Zealand legislation.
3. A waiver from ASX Listing Rule 15.7 to permit Sky to provide
announcements simultaneously to both ASX and NZX.
4. A waiver from ASX Listing Rule 14.3 to the extent
necessary to allow Sky to receive director nominations
between the date three months and the date two months
before the annual meeting.
5. A waiver from ASX Listing Rule 7.11.3 to the extent this
rule required Sky to make a non-renounceable offer of not
greater than one equity security for each equity security
held, and a waiver from ASX Listing Rule 7.1, 7.40 and
10.11 to allow Sky to utilise extra placement capacity.
6. Confirmation that the rights attaching to Sky shares set
out in Sky’s constitution are appropriate and equitable for
the purpose of ASX Listing Rule 6.1 and comply with ASX
Listing Rule 2.1.
7. Confirmation that ASX will accept financial accounts
prepared in accordance with New Zealand GAAP and
New Zealand Auditing Standards, and denominated in
New Zealand dollars.
8. Confirmation that Sky can provide to ASX substantial
holder information provided to it under the New Zealand
Securities Markets Act 1988 (now the Financial Markets
Conduct Act 2013).
9. A waiver from NZX Listing Rule 7.8.5(b) to the extent
this rule requires Sky to prepare an appraisal report
to accompany a notice of meeting provided to Sky
shareholders to consider a resolution to approve the issue
of the CEO Retention Shares.
10. A waiver from NZX Listing Rules 4.1 and 4.4 to the extent
these Rules required Sky to obtain approval by Ordinary
Resolution to issue equity securities under an accelerated
non-renounceable rights offer and a waiver for NZX Listing
Rule 4.5 to allow Sky to utilise additional placement capacity.
In connection with Sky’s admission to the official list
of the ASX, the following information is provided:
1. Sky is incorporated in New Zealand.
2. Sky is not subject to Chapters 6, 6A, 6B and 6C of
the Australian Corporations Act 2001 dealing with
the acquisition of shares (such as substantial holdings
and takeovers).
3. Limitations on the acquisition of the securities imposed
by New Zealand law are as follows:
(a) In general, Sky securities are freely transferable
and the only significant restrictions or limitations
in relation to the acquisition of securities are those
imposed by New Zealand laws relating to takeovers,
overseas investment and competition.
(b) The New Zealand Takeovers Code creates a general
rule under which the acquisition of more than 20%
of the voting rights in Sky or the increase of an
existing holding of 20% or more of the voting rights
in Sky can only occur in certain permitted ways.
These include a full takeover offer in accordance
with the Takeovers Code, a partial takeover offer in
accordance with the Takeovers Code, an acquisition
approved by an ordinary resolution, an allotment
approved by an ordinary resolution, a creeping
acquisition (in certain circumstances) or compulsory
acquisition if a shareholder holds 90% or more of
Sky shares.
(c) The New Zealand Overseas Investment Act 2005
(and associated regulations) regulates certain
investments in New Zealand by overseas persons.
The rules applicable to overseas investments have
recently been amended through the Overseas
Investment (Urgent Measures) Amendment Act
2020 (and associated regulations). In general
terms, consent or notification is likely to be required
where an ‘overseas person’ acquires shares or an
interest in shares in Sky that amount to more than
25% of the shares issued by SKY or, if the overseas
person already holds more than 25%, the acquisition
increases that holding.
(d) The New Zealand Commerce Act 1986 is likely to
prevent a person from acquiring Sky shares if the
acquisition would have, or would be likely to have,
the effect of substantially lessening competition
in a market.
106
Share Market and
Other Information
Enquiries
Sky is continually striving to improve its electronic
communications with investors and stakeholders and reduce
our environmental impact by encouraging investors to
receive communications electronically via Sky’s share registry,
Computershare Investor Services Limited. Sky investors can
elect to receive communications from Sky electronically by
visiting www.investorcentre.com/nz.
New Zealand
Sky’s ordinary shares are quoted on the NZX Main Board
and trade under the code SKT. Sky’s bonds are listed on the
NZX Debt Market and trade under the code SKT020. Sky’s
International Security Identification Number issued for the
Company by the NZX is NZSKTE0001S6.
NZX Limited
Level 1, NZX Centre
11 Cable Street
Wellington 6011, New Zealand
Mailing address:
PO Box 2959
Wellington 6140, New Zealand
Tel: +64 4 472 7599 Fax: +64 4 496 2893
Website: nzx.com
Australia
Sky’s ordinary shares are also quoted on the ASX and trade
under the code SKT.
ASX Limited
Exchange Centre
20 Bridge Street, Sydney
NSW 2000, Australia
Mailing address
PO Box H224
Australia Square, Sydney
NSW 1215, Australia
Tel: +61 2 9338 0000 Fax: +61 2 9227 0885
Annual Meeting
Details of the Annual Shareholder Meeting are available on
Sky’s website.
The next Annual Shareholder Meeting of Sky Network
Television Limited will be held via a web platform at
www.web.lumiagm.com, on Tuesday 13 October 2020,
commencing at 10:30 a.m. (NZ time).
107
Sky / 2020 Annual Report Directory
Registrars
Officers
Martin Stewart
Director and Chief Executive
Blair Woodbury
Chief Financial Officer
Sophie Moloney
Chris Major
Tex Teixeira
Chief Commercial Officer
and Company Secretary
Director of External Affairs
Chief Content Officer
Steve Bayliss
Chief Creative Officer
Chaz Savage
Chief Customer Officer
Prabhu Singh
Chief Technology Officer
Justin Tomlinson
Chief Innovation Advisor
New Zealand Registered Office
10 Panorama Road, Mt Wellington,
Auckland 1060, New Zealand
Tel: +64 9 579 9999 Fax: +64 9 579 8324
Website: sky.co.nz
Australian Registered Office
c/- Allens Arthur Robinson Corporate Pty Limited
Level 4, Deutsche Bank Place,
126 Philip Street,
Sydney, NSW 2000, Australia
Tel: +61 2 9230 4000 Fax: +61 2 9230 5333
Auditors to Sky
PricewaterhouseCoopers
PwC Tower, Level 27
15 Customs Street West, Auckland 1010
Tel: +64 9 355 8000 Fax: +64 9 355 8001
Solicitors to Sky
Buddle Findlay
PwC Tower,
15 Customs Street West, Auckland 1010
Tel: +64 9 358 2555 Fax: +64 9 358 2055
Chapman Tripp
Level 34, PwC Tower
15 Customs Street West, Auckland 1010
Tel: +64 9 357 9000 Fax: +64 9 357 9099
Shareholders should address questions relating to share
certificates, notify changes of address or address any
administrative questions to Sky’s share registrar as follows:
New Zealand Ordinary Share Registrar
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 0622
New Zealand
Mailing address:
Private Bag 92119
Auckland Mail Centre
Auckland 1142, New Zealand
Tel: +64 9 488 8700 Fax: +64 9 488 8787
Email: enquiry@computershare.co.nz
Australian Branch Register
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067
GPO Box 2975
Melbourne VIC 3000, Australia
Freephone: 1800 501 366 (within Australia)
Tel +61 3 9415 5000 (outside Australia)
Fax +61 3 9473 2500
Email: enquiry@computershare.co.nz
Bondholder Trustee
The New Zealand Guardian Trust Company Limited
Level 6, 191 Queen Street
Auckland 1010, New Zealand
Mailing address:
PO Box 274, Shortland Street
Auckland 1140, New Zealand
Tel: 0800 683 909 Fax: +64 9 377 7470
Email: ct-auckland@nzgt.co.nz
Directors
Philip Bowman (Chair) (appointed 1 September 2019)
Derek Handley
Geraldine McBride
Joan Withers (appointed 17 September 2019)
Keith Smith (appointed 21 April 2020)
Martin Stewart
Mike Darcey
Susan Paterson, ONZM
Peter Macourt (ceased 17 October 2019)
108
109
Sky / 2020 Annual Report 110